Netflix Inc. (NASDAQ: NFLX), the world's biggest online movie rental service provider, is scheduled to release its fourth quarter 2009 earnings after the closing bell on Wednesday, January 27, 2010. Analysts, on average, expect the company to report earnings of 45 cents per share on revenue of $445.62 million. In the year ago period, the company reported earnings of 38 cents per share on revenue of $359.60 million. The company has beaten Wall Street expectations in last two quarters.Netflix, Inc. provides online movie rental subscription services in the United States. The company offers its subscribers access to a library of movie, television, and other filmed entertainment titles on digital versatile disc (DVD). The company has over 100,000 DVD titles and a library of over 12,000 titles which can be streamed online.
In the preceding third quarter, the Los Gatos, California-based company reported a 48% growth in profit, helped by a 28% year-on-year subscriber growth. Net income was $30.14 million or $0.52 per share, up from $20.37 million or $0.33 per share in the prior-year period. Non-GAAP net income, which excludes stock-based compensation expense of $3.23 million and income tax benefit for the stock based compensation of $1.30 million, rose to $32.07 million or $0.55 per share from $22.14 million or $0.36 per share in the year-ago period. Revenue rose to $423.12 million from $341.27 million.Analysts, on average, expected the company to report earnings of $0.46 per share on revenue of $419.85 million. Gross margin of 34.9% improved to 80 basis points sequentially.
Netflix's total subscribers increased 28% to about 11.10 million at the end of the second quarter from 8.67 million at the end of the last year's comparable quarter. Gross subscriber additions for the quarter was 2.18 million, up from 1.53 million additions for the same period last year. As at September 30, paid subscribers rose to 10.83 million from 8.49 million at the end of the same quarter a year-ago.
Encouraged by strong third quarter results, the online movie rental company boosted its fourth quarter and full year financial guidance in October. For the fourth quarter of 2009, the company now anticipates earnings per share in the range of $0.38 per share to $0.47 per share, compared to its prior outlook range of $0.36 per share $0.44 per share. However, GAAP net income guidance range is maintained at $21 million to $26 million. Quarterly revenue is now projected in the range of $440 million to $446 million, up from the prior range of $431 million to $445 million. Netflix predicted it would add 900,000 to 1.2 million subscribers in the fourth-quarter - the biggest three-month influx of subscribers in the company's history.
For the full-year 2009, GAAP net income is now projected in the range of $106 million to $111 million, or $1.82 to $1.90 per share, compared to previous forecast in the range of $99 million to $109 million, or $1.65 to $1.82 per share. The company narrowed its annual revenue guidance range to $1.666 billion to $1.672 billion, compared to its earlier range of $1.65 billion to $1.67 billion. For the full year, the company projected net sub growth of more than 2.7 million subscribers measured from the midpoint of guidance. That’s 77% higher net sub growth than the midpoint of its January full-year guidance forecast.
Netflix is committed to approximately 10% operating margins for the full year 2010. Netflix also has plans for international expansion of its online streaming service in the second half of 2010.
The company has been steadily gaining market share at the expense of its competitors. Late in October, Netflix announced that it is partnering with Sony Computer Entertainment America Inc. to make movies and TV episodes from Netflix available to be streamed to TVs through PlayStation3, beginning in November. Industry experts believe that the move boosted the subscriber base of Netflix n fourth quarter. As of September 30, U.S. had about 9 million units of the PS3 system installed base. The company would have benefitted from solid holiday season and cold weather as well.
Recently, Netflix said that it has entered into a deal with Nintendo according to which the Wii console owners would be able to stream Netflix TV programs and movies this spring onwards. According to Nintendo, 26 million Wii consoles have been sold in the United States till date, giving Netflix another potential opportunity to lure more subscribers to its service. Netflix has been already streaming through Microsoft Corp.'s gaming console Xbox 360 since last year.
The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 21.93 and PEG (5 yr expected) of 1.60. In terms of stock performance, Netflix shares have gained nearly 69% over the past year.
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