What to expect from Netflix earnings

Netflix expects to add 2.5 million new subscribers during Q2

Netflix Inc. is set to report its second-quarter earnings after the market closes on Monday.

Here’s what investors can expect:

Earnings:

Netflix is expected to report earnings of 3 cents per share, according to analysts surveyed by FactSet. That would be a 50% drop compared with the same quarter a year ago, as well as a 50% drop compared with the company’s 2016 first quarter.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, also expects Netflix to post earnings of 3 cents per share.

Netflix has beat FactSet’s per-share earnings consensus in eight of the last 10 quarters.

Revenue:

Revenue for the second quarter is expected to hit $2.11 billion, according to analysts tracked by FactSet. That breaks down to an expected $1.21 billion from the domestic streaming category, $756 million from international streaming and $139 million from the domestic DVD business. Netflix revenue has come in below FactSet consensus in the last four quarters.

Estimize estimates forecast Netflix revenue will be $2.12 billion.

Share price:

Analysts covering Netflix’s stock have an average $116 12-month price target and an overweight rating, according to FactSet. Shares of Netflix are down more than 14% in the year to date. Shares dipped below $100 in early June, falling 14.6% before hitting $85.33 toward the end of the month. The stock has been beaten around by analysts recently because of risk attached to its international expansion and exposure to the U.K. vote to leave the European Union, known as Brexit, but shares gained more than 7% since the end of June.

Netflix added 6.74 million new subscribers during its first quarter, including 4.51 million international members and 2.23 million in the U.S. The streaming giant expects net additions for the second quarter to be down to just 2.5 million, compared with 3.28 million during the same quarter last year. Netflix forecast it will add 2 million subscribers internationally and just 500,000 in the U.S.

“As expectations around subscriber growth have become less sanguine, we believe the risk/reward around Netflix is becoming more compelling heading into earnings,” Raymond James analyst Justin Patterson wrote in a recent note to clients.

Patterson also noted that the near-term competition from the Summer Olympics raises concern around Netflix’s subscriber growth in the U.S.

“Based on our conversations, we believe investors are bracing for paid net adds guided below consensus for [the third quarter] in the U.S. (less than 800,000) and international (less than 2.69 million),” he wrote. “We acknowledge there is risk, but view the factors as more a function of timing than structural factors.

“While the Olympics is a modest headwind, we expect trends in [the fourth quarter] and 2017 to be appreciably stronger. Relevancy of the content library is Netflix’s main constraint in launching (in) any market and we believe Netflix’s offering will improve materially with time and data.”

Alibaba Is Reportedly Formulating A Bid For Netflix

August 05, 2016

In an effort to capitalize on the massive content market in China, Alibaba has recently been spending resources trying to gain a world-class foothold of that segment. These efforts have largely been via its Tmall Box Office unit, a subscription service similar to Netflix, which launched late last year.

"Our mission, the mission of all of Alibaba Group Holding Ltd, is to redefine home entertainment," Liu Chunning, President of Alibaba's Digital Entertainment unit, said back in June of 2015.

"Our goal is to become like HBO in the United States, to become like Netflix in the United States," he said.

A hurdle to win into the Chinese content market has recently risen for Alibaba. LeEco, a China-based technology firm involved in everything from streaming video to automated cars, recently bought Vizio, the largest maker of U.S. televisions.

As competition for content distribution in China heats up, Alibaba making a move for Netflix may mark a huge turning point in dampening that competition, a source told Benzinga.

Emails to both companies were not returned.

Commenting on the possibility of a deal, a Detwiler Fenton analyst who spoke with Benzinga said, "Alibaba could easily absorb Netflix."

The Detwiler analyst noted Netflix is likely to experience "very low organic growth in the US, as their markets are generally mature and saturated."

Netflix shares slide 5% amid concerns over Q3 subscriber additions

September 21, 2016

Shares of Netflix Inc. fell more than 5% midday on Wednesday. A report from data research and analytic firm M Science suggests the streaming giant's third quarter subscriber growth has been negatively affected by churn, or subscribers canceling their subscriptions, due to price increases and the ungrandfathering of accounts, according to Seeking Alpha.

M Sciences expects Netflix to miss third-quarter U.S. subscriber growth estimates when it reports results Oct. 17. The FactSet consensus on subscriber additions is 310,000. Shares of Netflix are down more than 18% in the year to date, underperforming the S&P 500 Index which is up nearly 5% in the year.

Netflix Loses Key Support On Subscriber Churn Concerns

September 21, 2016

Netflix shares fell Wednesday morning after a report said that the media streaming giant will likely miss third-quarter subscriber targets due to increased churn.

M Science, citing its data mining, said churn is rising amid recent price hikes. It's predicting zero net U.S. subscriber additions. Netflix had predicted a Q3 increase of 400,000 domestic subscribers.

Netflix fell 5% to 93.33 on the stock market today, dropping below its 50-day moving average for the first time since early August.

On Tuesday, Netflix said it hopes to have half of its content be original programming within a few years.

Netflix CEO says no progress in entering China

September 20, 2016

WARSAW, Sept 20 (Reuters) - Netflix Inc has made no progress in its plan to enter the potentially lucrative Chinese market as it needs to obtain a government license, its Chief Executive Officer Reed Hastings said on Tuesday.

The video streaming service is seeking to grow its subscriber base abroad to counter slowing growth in its home market of the United States.

The producer of popular TV series such as Narcos and House of Cards has recently entered countries such as Turkey and Poland, but remains absent in the world's most populous country.

Content providers in China face stringent regulations and censorship challenges.

whether Netflix had made any progress in entering China, Hastings told reporters: "No ... we are continuing to work on it. Same (problem) it has always been - government permissions, we got to get a specific licence in China."

Hastings said he could not give a specific timeframe for Chinese market entry.

Netflix is now the focus of Disney merger talk

Oct 3, 2016

Netflix’s stock surges in active trade following rumors Disney could be interested in an acquisition

Walt Disney Co. is on the prowl to acquire assets to add to its Goliath media and entertainment business; at least that’s the chatter on Wall Street.

Following reports last week Disney was considering a bid for the floundering but pioneering social-media platform Twitter Inc., the House of Mouse’s name was tied to interest in another buy: Netflix Inc.

Shares of Netflix climbed 4.1% in active trade Monday following the rumors, which began Friday and carried over the weekend. Volume reached 15.3 million shares, about double the full-day average.

A Netflix spokesman told MarketWatch the company doesn’t comment on rumors and declined to say anything further while the company is in a blackout period ahead of reporting earnings Oct. 17.

A spokeswoman for Disney wasn't immediately available for comment.

The timing of a possible Netflix buy would be tough to call, according to R.W. Baird analyst William Power, who wrote in a note to clients Netflix has been the subject of “recent M&A rumors,” and “whether Disney, Apple or someone else, Netflix could become a target.”

Power rates Netflix shares neutral with a price target of $94, which is 8.4% below current levels.

For Disney—with its record for successful, high-profile acquisitions—some analysts say making a play for a company to move Disney further into streaming video, specifically its sports and ESPN content, makes perfect sense.

In Q3, quarterly global streaming revenue exceeded $2 billion for the first time (up 36% year over year), helped by our strong content slate including Stranger Things and the second season of Narcos. On a constant currency basis, this represents 39% year over year revenue growth, a 400 basis point acceleration from the last two quarters. . . . . .

We kicked off Q3 with the release of Stranger Things on July 15 to both critical and audience acclaim. This nostalgic, supernatural thriller proved to be the blockbuster of the summer and is the kind of broad appeal, cross demographic, and cross border sensation that we hope will distinguish Netflix original content. Stranger Things is also notable as it is produced and owned by Netflix, which provides us with more attractive economics and greater business and creative control.

Our hit series Narcos returned for season two in September to great success among critics and audiences alike. Narcos had a positive impact on member acquisition across all of our markets, demonstrating the ability for our tentpole franchise to connect with audiences around the world.

The regulatory environment for foreign digital content services in China has become challenging. We now plan to license content to existing online service providers in China rather than operate our own service in China in the near term. We expect revenue from this licensing will be modest. We still have a long term desire to serve the Chinese people directly, and hope to launch our service in China eventually.

“We face immense competition for consumer screen time. Despite video gaming getting better, video messaging and sharing improving, MVPD UI enhancements, YouTube growth, more SVOD services, and other screen time competitors, Netflix continues to win both time and affection. We presume that Amazon Prime Video will become as global as YouTube and Netflix this fall with the launch of the Jeremy Clarkson show. Our challenge is to continue to improve our service and content so that we better meet consumer desires. Total screen time is quite large and growing as technology and content improve globally.”

Netflix earnings: What to expect from the streaming giant

Jan 17, 2017

Netflix Inc. is scheduled to report its fourth-quarter earnings results after the market closes on Wednesday.

Here’s what investors can expect:

Earnings:

Netflix is expected to report earnings of 13 cents per share, according to analysts surveyed by FactSet. That would be a 30% bump compared with last year’s fourth quarter and an 8% increase from its most recent third-quarter per-share earnings. Netflix has beaten FactSet’s earnings consensus in eight of the past 10 quarters.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects Netflix to report per-share earnings of 15 cents.


Revenue:

Revenue for the quarter is expected to hit $2.47 billion, up more than 35% compared with the same period a year ago, according to analysts tracked by FactSet. That breaks down to an expected $1.39 billion in revenue from domestic streaming subscriptions, $942 million in international streaming revenue and $126 million from Netflix’s DVD shipping business. The streaming giant has posted revenue below FactSet expectations in five of the last 10 quarters.

Estimize forecasts Netflix revenue will be $2.47 billion.


Share price:

Analysts covering the stock have an average 12-month price target of $125.97, about 2.4% below current trading levels. The analysts, on average, rate Netflix stock overweight, according to FactSet.

Shares of Netflix are up more than 10% in the trailing 12-month period, and have gained more than 29% in the past three months. Comparatively, the S&P 500 Index is up 16% in the past 12 months, while the Dow Jones Industrial Average is up nearly 21% and the tech-heavy Nasdaq Composite Index has gained 17% in the past 12 months.


Other issues:

For Netflix, the focus has always been on its subscriber growth. The tech company turned media company has adamantly refused to implement an advertising model and instead increased subscription prices, which had an adverse impact on growth.

As a means to increase its subscriber base, Netflix launched its service worldwide at the onset of 2016. Growth in new overseas markets has been slower than expected, according to J.P. Morgan analysts led by Doug Anmuth. To increase growth and appeal to a wider audience, Netflix has burned through cash to increase its original content selection, including more location-based shows and films, as well as the languages that accompany them.

Netflix plans to increase its hours of original programming to 1,000 in 2017, from 600 in 2016.

For the quarter, Netflix added 1.93 million memberships in the U.S. and 5.12 million internationally. Those figures came in well above the streaming giant's forecast that it would add 1.45 million subscribers in the U.S. and 3.75 million subscribers internationally.

Analysts expected subscriber numbers to come in slightly below those levels, about 1.44 million in the U.S. and 3.73 million internationally, according to StreetAccount consensus estimates.

Since our global expansion is proceeding well, we intend to grow our global operating margin for many years ahead. We've been around a 4% annual operating margin for the past two years, and we are targeting about 7% for the full year 2017 based on current F/X rates

Lower subscriber growth could hurt Netflix's first quarter earnings, analysts warn

• Consensus estimates for Netflix Q1: revenue $2.64B, EPS $0.38, 5.3m subscriber adds
• Subscriber growth expected to be lower than recent quarters due to weak original content
• Cash burn on original content also a concern for some analysts

April 17, 2017

Analysts are cautiously positive about Netflix's first quarter, granted they hit subscriber growth expectations.

Netflix will report its first quarter earnings after the closing bell on Monday. It is expected to have $2.64 billion in revenue, marking about 35 percent year-over-year increase according to a Thomson Reuters consensus estimate. Earnings per share is estimated at $0.38.

Netflix's stock success has been mostly based on its ability to add paid subscribers. The company is expected to announce it added 5.3 million subscribers during the first quarter, marking a slowdown from 7.1 million last quarter and 6.7 million the year prior. Growth is expected mostly from international viewers, while the U.S. market cools as it reaches subscriber saturation.

"Our quarterly U.S. subscriber survey suggests potentially weak Q1 U.S. results, though we acknowledge strong international results, which is the bigger current investor focus, may trump U.S. weakness," Baird analyst William Power said in a report. "However, with expectations for a strong overall quarter already high, we'd still be cautious into Q1 results. Though the quarter included several solid new shows, it seemed to lack a strong universal new hit, which may have contributed to the weaker survey results."

MKM Partners analyst Rob Sanderson pointed out in a note Netflix's original content slate during the fourth quarter was relatively weak, including shows like "A Series of Unfortunate Events," stand-up comedy specials from Dave Chappelle, and the critically-panned "Iron Fist."

However, there is hope the second quarter will get a higher subscriber boost. Shows like "13 Reasons Why" released during the first quarter have been topping social media mentions, and fan favorites "House of Cards" and "Orange is the new Black" are returning, Sanderson said.

But Netflix will also have to face more competitors in the over-the-top (OTT) TV space, or TV service that is not reliant on cable or satellite services. Google is launching its YouTube TV service this year, and Hulu will also have an OTT service out this year. Dish Network and AT&T, through DirecTV, are also bolstering their offerings. Meanwhile, Amazon has also increased its original content.

And, increasing premium programming also means that Netflix will have to spend more on content. Wedbush analyst Michael Pachter said the company is expected to spend $7 billion in content in 2017, up from $6 billion in 2016.

"We continue to believe that Netflix cash burn is important and is largely overlooked by investors," Wedbush analyst Michael Pachter said in a note. "As the cost of content continues to be bid up, we expect Netflix to continue to burn cash to fund its acquisition of original and exclusive content."

- EPS: 40 cents vs. 37 cents per share expected by a Thomson Reuters estimate

- Revenue: $2.64 billion vs. $2.64 billion expected by a Thomson Reuters estimates