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An Early Netflix (NFLX) Q3 Earnings Preview

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Shares of Netflix (NFLX - Free Report) dipped Friday, but the streaming giant’s one-day movement doesn’t mean much as we get closer to the release of the firm’s third-quarter financial results. With that said, let’s look at what we can expect from Netflix’s Q3 results.   

Overview

Many investors will remember that Netflix’s shares tanked after the company announced its Q2 earnings results. But it wasn’t the streaming firm’s top and bottom line expansion that led to a significant pullback. Instead, Netflix added 1 million fewer subscribers than it projected.

NFLX still grabbed 5.2 million new subscribers last quarter, but the big miss stood out since the firm had topped its subscriber projections in seven out of the previous nine quarters—topping estimates by 1 million in Q1 and 2 million in Q4.

We can see in the chart below that Netflix’s post-Q2 selloff lasted for over a month. Since then, shares of NFLX have slowly climbed back up as investors jump back into the streaming giant.

 

Q3 Outlook

Netflix expects to add 650,000 subscribers in the U.S. and 4.35 million internationally in the third quarter. This would bring its subscriber total to just over 135 million worldwide. Meanwhile, our Non-Financial Metrics estimates are calling for Netflix to add 669,450 domestic subscribers and 4.40 million international members.

Both of these NFM subscriber estimates are clearly above what the company called for at the end of the second quarter. But, how Netflix performs compared to its own estimates will likely dictate how NFLX stock trades in the short-term. 

Moving on, our current Zacks Consensus Estimate is calling for Netflix’s Q3 revenues to jump by 33.7% to reach $3.99 billion. At the other end of the income statement, Netflix is projected to see its adjusted quarterly earnings soar 134.5% to $0.68 per share. Netflix has also earned two upward earnings estimate revisions within the last 60 days, against zero downward changes.  

Bottom Line

Netflix is currently one of the largest streaming TV platforms. But the firm has committed billions of dollars on content to better compete against HBO (T - Free Report) , Amazon (AMZN - Free Report) , and soon enough Disney (DIS - Free Report) and Apple (AAPL - Free Report) .

Netflix is scheduled to release its Q3 financial results on Tuesday, October 16.

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