Netflix (NASDAQ: NFLX): Q2 Earnings Preview 2011

Netflix, Inc. (NASDAQ: NFLX) is scheduled to release its second-quarter earnings after the closing bell on Monday, July 25, 2011. Analysts, on average, expect the company to report earnings of $1.11 per share on revenue of $790.49 million. In the year ago period, the company reported earnings of 80 cents per share on revenue of $519.82 million.

Netflix, Inc. provides online movie rental subscription services in the United States. The Company’s subscribers can watch unlimited movies and television episodes streamed to their televisions and computers, and can receive DVDs delivered to their homes. Over the years, Netflix has shifted its business model from a traditional rental model to offering many subscription options at various price points and added streaming a few years ago. It was originally seen as a niche add-on for die-hard techies, but now streaming accounts for the majority of Neflix viewing. 

In the preceding first quarter, the Los Gatos, California-based company's net income was $60.2 million, or $1.11 per share, compared to $32.3 million, or $0.59 per share, in the year-ago quarter. Revenue increased 46% to $718.55 million from $493.67 million in the same quarter last year. Analysts on average, had expected a profit of $1.07 a share on revenue of $705.7 million. 

At its last earnings call in April, the company said that it anticipates second-quarter net income to be in the range of $50 million to $62 million or $0.93 to $1.15 per share. Revenue for the second quarter reported as domestic and international is expected to be in the range of $762 to $778 million and $16.0 million to $20.0 million, respectively. Management expects subscribers in the domestic market to be between 24.0 million and 24.8 million. Subscribers in the international market are estimated to be between 0.9 million and 1.1 million. Netflix estimates domestic operating income to be between $100.0 million and $116.0 million, while the international business is expected to incur losses in the range of $14.0 million to $ 10.0 million. Netflix projects the domestic operating margin to be approximately 14.0% and expects the Canadian operations to have a positive impact on operating margins starting from the third quarter of 2011. In the latter half of 2011, management expects international operations to incur operating losses of approximately $50 million to $70 million.

Netflix has become the dominant player in home-video rentals, offering unlimited one-at-a-time DVD rentals by mail or instantly streamed movies via the Internet. 2010 was a great year for Netflix in terms of subscriber additions. For the whole year, the company added about 7.74 million subscribers amounting to a total 20 million at the year end, representing 63% growth over 2009. Some forecasts estimate that Netflix will boast 55 million subscribers by 2015.

Netflix is focused on becoming an entertainment powerhouse by content additions to its already vast and varied library, through partnerships with big production houses like Paramount Pictures and Twentieth Century Fox, to name a couple. these content additions will enable Netflix to reduce its dependence on cable TV operators and also provide the necessary competitive edge over its peers in the emerging market of online video streaming. Netflix has been gaining rights of few original series and its partnership with the big houses reflects the financial prowess of the company. These content additions will enable Netflix to reduce its dependence on cable TV operators and also provide the necessary competitive edge over its peers in the emerging market of online video streaming. Netflix has been gaining rights of few original series and its partnership with the big houses reflects the financial prowess of the company.

Netflix intends to expand its business into new territories going forward. Recently, the company announced its plan to launch Internet movie subscription service in Latin America and in the Caribbean. This would mark Netflix’s second venture outside the United States, after it had started its service in Canada last September. Netflix subscribers, in countries such as Mexico, South and Central America and the Caribbean, will be able to stream a wide range of movies and popular TV shows on any gadgets that can be connected to the Internet. The service will be available in Spanish, Portuguese and English. However, the company has not disclosed any pricing plans or specified any date for the availability of the service.

Over the last 12-18 months, the company had been shifting away from its original DVD rental business and primarily focusing on online streaming content. This was primarily due to the fact that the rental DVD service is a low-margin business compared to online streaming given the high postage and sorting infrastructure costs. The company recently announced new subscription plans for its DVD-by-mail and streaming customers.  Under the new plan, customers who seek to subscribe for both the DVD-by-mail and streaming services will have to pay $16.00 per month for unlimited access. Previously, Netflix used to charge $10.00 a month for the bundled offering. Netflix announced that the unlimited streaming only plan will remain at $8.00 per month. However, to get an add-on DVD along with the streaming service, customers will have to pay an additional $8.00. Previously, the company used to charge $2.00 for the same. Further, customers who want to hire two DVDs will have to pay an additional $12.00 per month while to hire three the customer has to pay $16.00 per month.

In terms of stock performance, Netflix shares have gained nearly 55 percent since the beginning of the year. Few industry watchers believe that Netflix's's high valuation is a potential risk factor. It is now being argued that with expectations running so high, the company risks disappointing investors and analysts. Also, Netflix might face competition from Amazon (NASDAQ: MZN) Prime video streaming service that was launched last quarter. Apart from the subscriber momentum, investors should look out as to where Netflix’s content acquisition costs are headed. Netflix’s expansion in future is likely to come at a higher cost compared to past. Shares of the company are currently trading at roughly 41.89 times consensus 2012 EPS estimates.

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Netflix Inc. (NASDAQ: NFLX): Q1 2011 Earnings Roundup

Netflix Inc. (NASDAQ: NFLX) reported late Monday that its firsy-quarter profit jumped 88% to $60 million, or $1.11 a share, from a profit of $32 million, or 59 cents a share, in the same quarter a year ago. Revenue surged 46% to $719 million. Analysts on average, had expected a profit of $1.07 a share on revenue of $705.7 million. 

Looking ahead to the second-quarter, the company said that it anticipates net income to be in the range of $50 million to $62 million or $0.93 to $1.15 per share. Analysts currently expect the company to report earnings of $1.19 per share for the quarter. 

Netflix shares slumped more than 5% in Monday's after-hours trading.

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Netflix (NASDAQ: NFLX): Q1 Earnings Preview 2011

Netflix, Inc. (NASDAQ: NFLX) is scheduled to release its first-quarter earnings after the closing bell on Monday, April 25, 2011. Analysts, on average, expect the company to report earnings of $1.08 per share on revenue of $703.60 million. In the year ago period, the company reported earnings of 59 cents per share on revenue of $493.66 million.

Netflix, Inc. provides online movie rental subscription services in the United States. The Company’s subscribers can watch unlimited movies and television episodes streamed to their televisions and computers, and can receive DVDs delivered to their homes. Over the years, Netflix has shifted its business model from a traditional rental model to offering many subscription options at various price points and added streaming a few years ago. It was originally seen as a niche add-on for die-hard techies, but now streaming accounts for the majority of Neflix viewing. 

In the preceding fourth quarter, the Los Gatos, California-based company's net income was $47.09 million, or 87 cents per share, compared to $30.91 million, or 56 cents per share, in the year-earlier quarter. Revenue increased 34.1% to $595.92 million from $444.54 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 71 cents per share on revenue of $597.49 million. 

At its last earnings call in January, the company said that it expects to end the first quarter with 21.9 million to 22.8 million U.S. subscribers, and revenue of $684 million to $704 million. Net income is expected to be in the range of 90 cents to $1.13 a share. In the overseas markets, Netflix expects subscribers to increase to a range of 0.75 million to 0.9 million for the first quarter.For fiscal 2011, Netflix expects to achieve U.S. operating margin of 14.0%. US subscriber net additions are expected to grow in 2011. Netflix expects Canadian operations to have a positive operating margin by third quarter 2011. International expansion beyond Canada is however expected to incur an operating loss of $50.0 million in fiscal 2011.

Netflix has become the dominant player in home-video rentals, offering unlimited one-at-a-time DVD rentals by mail or instantly streamed movies via the Internet. 2010 was a great year for Netflix in terms of subscriber additions. For the whole year, the company added about 7.74 million subscribers amounting to a total 20 million at the year end, representing 63% growth over 2009. In the third quarter, the company added 5.65 million new subscribers, with net additions totaling 3.08 million. The company ended the period with 20.01 million subscribers, up 63.1 percent from 12.27 million in the previous year.Some forecasts estimate that Netflix will boast 55 million subscribers by 2015.

Netflix is in the process of doubling its spending on content to more than $1.1 billion. Netflix said recently that it will start streaming the hit TV series "Mad Men" in a multi-year deal with Lions Gate, the show's producer. The companies said that the show's first four seasons will be available beginning July 27. Last month, Netflix reported a new multi-year licensing agreement with Paramount Pictures, a division of Viacom Inc, adding hundreds of new movie titles, including the exclusive subscription television rights to all first-run films, for Canadian Netflix members to watch instantly on their computers and TVs. In February, Netflix entered into a two-year, non-exclusive licensing agreement with CBS Corp. (YSE: CBS) that will allow select TV shows from CBS's library, including episodes of "Medium" and "Flashpoint" as well as full seasons of classics such as "Frasier," and "Cheers," to be streamed instantly from Netflix.

In terms of stock performance, Netflix shares have gained nearly 181 percent over the past year. Few industry watchers believe that Netflix's's high valuation is a potential risk factor. It is now being argued that with expectations running so high, the company risks disappointing investors and analysts. Also, Netflix might face competition from Amazon (ANASDAQ: MZN) Prime video streaming service that was launched last quarter. Apart from the subscriber momentum, investors should look out as to where Netflix’s content acquisition costs are headed. Netflix’s expansion in future is likely to come at a higher cost compared to past. Shares of the company are currently trading at roughly 40 times consensus 2012 EPS estimates.

Full Disclosure: None.

Netflix Falls As Facebook Announces Movie Deal With Warner Brothers

Shares of Netflix, Inc. (NASDAQ: NFLX) slumped as much as 4% on Tuesday after Facebook announced that it has made a deal with Warner Brothers to distribute movies on its platform. Warner Bros. said Monday that it is beginning to test renting movies via Facebook, using Facebook Credits, allowing consumers to watch movies directly from the social networking site. For now, the only movie available to rent on Facebook is Batman: The Dark Knight, but more should begin to appear soon. Stay tuned for more.

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Netflix (NASDAQ: NFLX): Q4 Earnings Preview 2010

Netflix, Inc. (NASDAQ: NFLX) is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, January 26, 2011. Analysts, on average, expect the company to report earnings of 71 cents per share on revenue of $597.23 million. In the year ago period, the company reported earnings of 56 cents per share on revenue of $444.54 million.

Netflix, Inc. provides online movie rental subscription services in the United States. The Company’s subscribers can watch unlimited movies and television episodes streamed to their televisions and computers, and can receive DVDs delivered to their homes.

In the preceding third quarter, the Los Gatos, California-based company's net income was $38 million, or 70 cents a share, compared to $30.1 million, or 52 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 78 cents a share in the latest quarter. Revenue increased 31% to $553.2 million from $423.1 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 72 cents per share on revenue of $550.95 million. 

At its last earnings call in October, the company boosted its fourth quarter and fiscal 2010 outlook. Netflix said that it expects fourth quarter earnings in the range of 59 cents to 74 cents per share or $32 million to $40 million, up from the previous forecast of 58 cents to 73 cents per share. Revenue is now anticipated to range between $586 million and $598 million, up from the prior estimate of $580 million to $596 million. Analysts currently expect the company to report fourth-quarter earnings of 71 cents per share on revenues of $592.83 million. For full year 2010, the company now anticipates earnings of $146 million to $154 million or $2.68 to $2.83 per share, up from the previous forecast of $141 million to $156 million or $2.58 to $2.86 per share. Revenue is now anticipated to be in a range of $2.15 billion to $2.16 billion. Netflix is committed to approximately 10% operating margins for the full year 2010. 

For fiscal 2011, Netflix expects to achieve 12.0% operating margin growth, based on strong demand from the North American market. Management expects to grow subscribers by over 50.0% year over year for fiscal 2011.

Netflix has been rapidly acquiring subscribers and steadily gaining market share at the expense of its competitors such as Blockbuster and Movie Gallery, both of which filed for bankruptcy this year (the former continues to operate as it tries to restructure, while the latter has been liquidated). In the third quarter, total subscribers of Netflix jumped 52% to 16.93 million from the year ago quarter, a 13% sequential growth. Netflix expects to end the fourth quarter with 19.0 million to 19.7 million subscribers, up nearly 60% from 2009. That translates to about 17% of the 115 million U.S. households. Some forecasts estimate that Netflix will boast 55 million subscribers by 2015.

Last month, Netflix reached a deal with Walt Disney Co. to stream television shows over the Internet. Netflix said it will stream hundreds of episodes from the ABC Television Network, Disney Channel and ABC Family. The company also cut a deal with FilmDistrict, a distribution, production and financing company, to stream first-run films over the Internet shortly after they are released on DVD. According to Netflix, it has added significantly to the streaming content available to its members. The company reached licensing deals this year with NBC Universal, Warner Bros., 20th Century Fox, EPIX, Relativity Media and Nu Image/Millennium Films to add first-run theatrical films, hit TV series and movie classics to the company's streaming offering.

Over the years, Netflix has shifted its business model from a traditional rental model to offering many subscription options at various price points and added streaming a few years ago. It was originally seen as a niche add-on for die-hard techies, but now streaming accounts for the majority of Neflix viewing. During the quarter in review, Netflix rolled out a streaming-only subscription option in the U.S. Netflix also announced a series of price increases to its monthly fees. 

The company is expanding beyond the United States and recently introduced its movie-streaming service to Canada. It may expand internationally beyond Canada as early as this year, former Chief Financial Officer Barry McCarthy said in December. Management plans to invest approximately $50.0 million for such an expansion in the second half of 2011.

In December 2010, regulators adopted new plans that seek to ensure consumers can access any Web site at prices and speeds they are used to. Under the rules, cable companies such as Comcast cannot block access or charge competing services, such as Netflix , which offers movies and TV shows via the Web, in addition to its Internet-based mail delivery service of physical DVDs. Also in December, S&P announced that NFLX will replace Office Depot in the S&P 500.

In terms of stock performance, Netflix shares have gained nearly 275 percent over the past year. Few industry watchers believe that Netflix's's high valuation is a potential risk factor. It is now being argued that with expectations running so high, the company risks disappointing investors and analysts. Investors have also been concerned by the departure of the company's chief financial officer and substantial insider selling in recent months. Shares of the company are currently trading at roughly 48 times consensus 2011 EPS estimates.

Full Disclosure: None.

Netflix Inc. (NASDAQ: NFLX): Q1 Earnings Preview 2010

Netflix is scheduled to release its Q12010 earnings after the closing bell on Wednesday, April 21, 2010. Analysts, on average, expect the company to report earnings of $0.54 per share in the first quarter with estimates ranging from a low of $0.48 per share to a high of $0.60 per share. Revenues for the quarter are estimated to be $493.07 million. In Q12009, the company reported earnings of $0.37 per share on revenue of $394.10 million.

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 Q12010, the Los Gatos, California-based company reported net income of $30.9 million or $0.56 per share for the fourth quarter, compared to $22.7 million or $0.38 per share in the prior year quarter.Excluding stock-based compensation, Netflix earned $32.7 million, or 59 cents a share. Revenue for the fourth quarter rose 24% to $444.5 million from $359.6 million in the year-ago quarter. Analysts, on average, expected the company to report earnings of $0.45 per share on revenue of $445.56 million.

The company has been rapidly acquiring subscribers and steadily gaining market share at the expense of its competitors. The company ended the fourth quarter with about 12.3 million subscribers, a 31% improvement from the year-end 2008 total of 9.39 million. The company saw subscriber rolls rise 10% from previous quarter. By the end of the first quarter, Netflix expects to have 13.5 million to 13.8 million subscribers, and 15.5 million to 16.3 million by the end of 2010.

For the first quarter 2010, the company expects GAAP earnings of $26 million to $32 million, or $0.47 to $0.58 per share, and revenue of $490 million to $496 million.

For the full-year 2010, the company estimates GAAP earnings of $125 million to $137 million, or $2.28 to $2.50 per share, and revenue of $2.05 billion to $2.11 billion.

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.

Recently, the company officially brought streaming movies and television shows to the 28 million Wii users in the U.S.

Among other developments during the quarter, Netflix released an iPad-native application that would enable US subscribers to instantly stream TV shows and movies to the tablet device.

In terms of stock performance, Netflix shares have gained nearly 66 percent since the beginning of the year.

Full Disclosure: None.

Netflix Inc. (NASDAQ: NFLX): Q4 Earnings Preview 2009

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.

Full Disclosure: None.