Q3 Preview: Investors Hope Strong Netflix (NFLX) Earnings are 'On Demand'
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Shares of Netflix, Inc. (Nasdaq: NFLX) are trading higher today, ahead of the company's third quarter earnings report which is expected out after the market closes today. Shares are up 1.3% to $150.68 in afternoon trading.
The Los Gatos, CA-based company is expected to report an EPS of $0.72 on revs of $550.95 million. The EPS and revs are a 31% increase over estimates for the same period last year. In Q210, NFLX had an EPS of $0.80 on revs of $519.8 million, mixed to the consensus EPS of $0.71 and revs of $524.44 million.
Shares of the company basically exploded through the quarter, gaining 48% to $162.16 at the end of September. Year-to-date? The stock is up only 282%...no big deal. The stock is down about 6.8% since the end of the quarter.
The company, trading for a P/E of 40.6x FY11 EPS estimates, appears relatively cheap compared to peer Amazon.com (Nasdaq: AMZN), which is going for 44.1x.
Data from Bloomberg has 6 analysts with a Buy, 15 with a Hold, and nine suggesting to Sell. The analyst price target consensus is $121.00, with a high of $186 and a low of $78.
Analyst Ratings Through the Quarter
At the end of July, Morgan Stanley upgraded the shares from Equal Weight to Overweight.
Starting September, ThinkEquity started coverage on shares with a Hold rating.
Jeffries increased their price target from $128 to $175 million, while keeping their Buy rating.
Also in September, Credit Suisse upgraded the company from Underperform to Neutral, with a price target boosted from $90 to $140.
Summary
Although shares are trading at a lower P/E to peer Amazon.com, shares of the company have notably tripled throughout 2010, a rapid ascent by most accounts despite an overall broader market rally.
The company made their services available in Canada last month. While the late-September news may not add immediately to third quarter earnings, colder Canadian climate may boost revenues markedly going forward.
Netflix was also confirmed on Apple's (Nasdaq: AAPL) TV service, which appears to be a better unit that Apple's previous foray into digital TV. The only other confirmed providers are News Corp.'s (Nasdaq: NWSA) FOX and ABC, of Walt Disney (NYSE: DIS), providing Netflix with a sweet spot in a niche market.
Dougherty & Co. sees NFLX with a September EPS of $0.74 on revs of $547.2 million. They note that momentum may carry through to this quarter, with a 41.5% increase in subs last quarter. Though ARPU is declining due to new customers choosing the $8.99 plan, gross profit on the plan is better than more expensive options from the company. Dougherty has a Neutral rating and $140 price target on the shares.
Many are whispering that Netflix needs to report stellar numbers in order to keep afloat following their rapid rise this year. However, with brick-and-motor competitors dropping like flys (Blockbuster, Movie Gallery), stock gains may be their new "on demand" feature.
The momentum is clearly on Netflix, but with rivals like Amazon and Google looking to encroach on the company's near-monopoly steaming movie business, shorts will look for any sign of weakness.
Netflix, Inc. is expected to release their Q310 earnings on Wednesday, October 20, 2010, at approximately 4:00pm EDT. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
The Los Gatos, CA-based company is expected to report an EPS of $0.72 on revs of $550.95 million. The EPS and revs are a 31% increase over estimates for the same period last year. In Q210, NFLX had an EPS of $0.80 on revs of $519.8 million, mixed to the consensus EPS of $0.71 and revs of $524.44 million.
Shares of the company basically exploded through the quarter, gaining 48% to $162.16 at the end of September. Year-to-date? The stock is up only 282%...no big deal. The stock is down about 6.8% since the end of the quarter.
The company, trading for a P/E of 40.6x FY11 EPS estimates, appears relatively cheap compared to peer Amazon.com (Nasdaq: AMZN), which is going for 44.1x.
Data from Bloomberg has 6 analysts with a Buy, 15 with a Hold, and nine suggesting to Sell. The analyst price target consensus is $121.00, with a high of $186 and a low of $78.
Analyst Ratings Through the Quarter
At the end of July, Morgan Stanley upgraded the shares from Equal Weight to Overweight.
Starting September, ThinkEquity started coverage on shares with a Hold rating.
Jeffries increased their price target from $128 to $175 million, while keeping their Buy rating.
Also in September, Credit Suisse upgraded the company from Underperform to Neutral, with a price target boosted from $90 to $140.
Summary
Although shares are trading at a lower P/E to peer Amazon.com, shares of the company have notably tripled throughout 2010, a rapid ascent by most accounts despite an overall broader market rally.
The company made their services available in Canada last month. While the late-September news may not add immediately to third quarter earnings, colder Canadian climate may boost revenues markedly going forward.
Netflix was also confirmed on Apple's (Nasdaq: AAPL) TV service, which appears to be a better unit that Apple's previous foray into digital TV. The only other confirmed providers are News Corp.'s (Nasdaq: NWSA) FOX and ABC, of Walt Disney (NYSE: DIS), providing Netflix with a sweet spot in a niche market.
Dougherty & Co. sees NFLX with a September EPS of $0.74 on revs of $547.2 million. They note that momentum may carry through to this quarter, with a 41.5% increase in subs last quarter. Though ARPU is declining due to new customers choosing the $8.99 plan, gross profit on the plan is better than more expensive options from the company. Dougherty has a Neutral rating and $140 price target on the shares.
Many are whispering that Netflix needs to report stellar numbers in order to keep afloat following their rapid rise this year. However, with brick-and-motor competitors dropping like flys (Blockbuster, Movie Gallery), stock gains may be their new "on demand" feature.
The momentum is clearly on Netflix, but with rivals like Amazon and Google looking to encroach on the company's near-monopoly steaming movie business, shorts will look for any sign of weakness.
Netflix, Inc. is expected to release their Q310 earnings on Wednesday, October 20, 2010, at approximately 4:00pm EDT. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
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