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Netflix Hits New High Ahead of Earnings: Should You Buy?

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Shares of Netflix NFLX surged to hit a new all-time intraday high on Monday, just one week before the streaming giant is scheduled to report its fourth-quarter earnings.

Netflix saw its stock price jump nearly 2% to touch $222.55 per share, as investors begin to show their excitement for what could turn out to be a strong end to fiscal 2017 for the company. Before today’ gains, shares of Netflix had skyrocketed 71.26% over the last 52-weeks.

Now, with the streaming powerhouse that has become a major player in Hollywood set to announce its Q4 results on Jan. 22, let’s take a look at what investors might expect from the report.

Latest Outlook

Last week, Macquarie Research analysts upgraded Netflix shares from neutral to outperform. The firm also upped its Netflix price target from $200 per share to $220. In a note to clients, analysts pointed to Netflix’s subscription model as a key reason for the upgrade, as this model presents a better opportunity going forward than ad-supported content.

On top of that, Loop Capital Markets analyst David Miller reiterated his “Buy” rating for Netflix.

Miller also raised his price target from $237 per share to $240 per share and called the company his "best idea of 2018."

In 2017, Netflix reportedly spent $6 billion to launch 30 new original shows, and now expects to up its spending in 2018 to $8 billion. The company has made moves to greatly increase its library of original content as it competes in a quickly growing market that has seen Amazon AMZN and Hulu spend more money as well.

Another major factor that has led to the company’s big spending on content is the fact that Disney (DIS - Free Report) —in a move that could become more popular among entertainment companies—is set to end its relationship with Netflix before it starts its own over-the-top streaming service.

Netflix now has 88 original scripted series. Time Warner’s TWX HBO, which has long been a premium content power, has 21 original scripted series, while Amazon has 28 and Hulu has 17.

In the third-quarter, Netflix added 5.3 million subscribers to bump its total up to 109.25 million subscribers from over 190 countries. This came after the company added 5.2 million new users in Q2, which was several million users than most estimates called for.

The company saw its quarterly revenues pop 30.03% year-over-year in its third-quarter to hit $2.99 billion. Netflix’s strong third-quarter prompted the company to announce that it expects to see full-year 2017 sales exceed $11 billion.

Netflix also announced that it expects to add 6.30 million new subscribers in the fourth quarter. The streaming firm predicts that it will add 1.25 million new users in the U.S. and 5.05 million internationally. The company projects it will end 2017 with a total of 115.55 million subscribers.

However, these big subscriber projections are down from the year-ago period that saw the company add 7.05 million new users, which marked an all-time high for quarterly net adds.

“As we move into 2018, we aim to achieve steady improvement in international profitability and a growing operating margin as our success in many large markets helps fund investments throughout Asia and the rest of the world,” the company noted in a statement.

Our current Zacks Consensus estimates are calling for Netflix’s fourth-quarter 2017 sales to hit $3.28 billion, which would mark a 32.40% year-over-year jump. For the full-year, Netflix is projected to post $11.69 billion in revenues.

In terms of bottom-line growth, the streaming company’s Q4 earnings are expected to skyrocket 173.33% to hit $0.41 per share. Netflix’s full-year EPS is projected to hit $1.25 per share, which would mark a year-over-year climb of nearly 191%.

Netflix is expected to post its official fourth-quarter and full-year 2017 results after the closing bell next Monday, Jan. 22.

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