Q4 Preview: Netflix (NFLX) Rebounds in U.S., But Int'l Still Looks Sour
Tweet
Share
E-mail
Get Alerts NFLX Hot Sheet
Price: $79.59 -0.69%
Rating Summary:
57 Buy, 26 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
57 Buy, 26 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Join SI Premium – FREE
Netflix (Nasdaq: NFLX) shares are trading higher Wednesday heading into its fourth-quarter report. Dim the lights, grab the popcorn, and settle in for a quarterly preview...
After the market closes, Netflix is expected to report earnings of 55 cents per share on revenue of $857.60 million. Such earnings would be a 37 percent decline from 87 cents per share reported in the fourth quarter last year. It should be noted Netflix has beaten Street views by an average of 16 percent over the last five quarters. Specifically for last quarter, Netflix topped the Street earnings estimate by 23.4 percent.
Shares fell 39 percent to $69.29 through the quarter and are up 37 percent since.
Netflix has already forecast the loss of 3.6 million DVD-by-mail subs for the quarter, and its Chief Content Officer Ted Sarandos said Netflix will see a decline in DVD subs no matter what. The comments came following a report earlier in January of an agreement between Netflix and Warner Bros. to extend the sales-only window for Theatrical New Release and made-for-video titles on DVD and Blu-ray Disc from the current 28 days to 56 days.
The comments by Sarandos, made at the National Association of Television Program Executives last Tuesday, also lead to questions on whether customers have gotten over the attempt by Netflix to cleave it's DVD and streaming divisions in two, which received much negative publicity. "Who knows," Sarandos said. He than added the confident statement: "We’ve kind of gotten through the point where people were bailing on the service over the changes and we’ve kind of returned to growth." Well, it was "kind of" confident anyway.
During the quarter, Netflix did a $400 million capital raise through the issuance of $200 million in common and another $200 million of convertible notes. In the stock offering, Netflix sold approximately 2.86 million shares at $70.00 per share.
Data from Bloomberg has seven analysts at Buy, 18 at Hold, and 10 with a Sell. The numbers are down from last quarter, when 11 analysts held a Buy rating, 16 were at Hold, and just five felt Netflix deserved a Sell.
The price target average is $78, with a low of $45 and high of $105. Netflix has traded in a range of $62.37 to $304.79 over the last year, and the Street's price target midpoint hints at downside to Netflix's current price in the mid-$90 range.
Analyst Comments
After the market closes, Netflix is expected to report earnings of 55 cents per share on revenue of $857.60 million. Such earnings would be a 37 percent decline from 87 cents per share reported in the fourth quarter last year. It should be noted Netflix has beaten Street views by an average of 16 percent over the last five quarters. Specifically for last quarter, Netflix topped the Street earnings estimate by 23.4 percent.
Shares fell 39 percent to $69.29 through the quarter and are up 37 percent since.
Netflix has already forecast the loss of 3.6 million DVD-by-mail subs for the quarter, and its Chief Content Officer Ted Sarandos said Netflix will see a decline in DVD subs no matter what. The comments came following a report earlier in January of an agreement between Netflix and Warner Bros. to extend the sales-only window for Theatrical New Release and made-for-video titles on DVD and Blu-ray Disc from the current 28 days to 56 days.
The comments by Sarandos, made at the National Association of Television Program Executives last Tuesday, also lead to questions on whether customers have gotten over the attempt by Netflix to cleave it's DVD and streaming divisions in two, which received much negative publicity. "Who knows," Sarandos said. He than added the confident statement: "We’ve kind of gotten through the point where people were bailing on the service over the changes and we’ve kind of returned to growth." Well, it was "kind of" confident anyway.
During the quarter, Netflix did a $400 million capital raise through the issuance of $200 million in common and another $200 million of convertible notes. In the stock offering, Netflix sold approximately 2.86 million shares at $70.00 per share.
Data from Bloomberg has seven analysts at Buy, 18 at Hold, and 10 with a Sell. The numbers are down from last quarter, when 11 analysts held a Buy rating, 16 were at Hold, and just five felt Netflix deserved a Sell.
The price target average is $78, with a low of $45 and high of $105. Netflix has traded in a range of $62.37 to $304.79 over the last year, and the Street's price target midpoint hints at downside to Netflix's current price in the mid-$90 range.
Analyst Comments
- Wedbush sees earnings of 61 cents per share and revenue of $869 million. Domestic streaming subs could be 21.3 million, DVD subs of 11.15 million, and international subs of 1.8 million.
The firm commented, "We estimate Netflix lost roughly 8 – 9 million DVD subs over 2H:11, with 2.63 – 3.63 million DVD subs expected to trade down or quit in Q4. Massive attrition of its most profitable subs, coupled with increased spending on content, likely forced Netflix to raise capital at less-than optimal terms." Wedbush also was bearish on investor outlook for Netflix sub adds, saying "investors should note that each hybrid customer who traded down to a single-service plan requires a net subscriber addition to offset the foregone revenue. This means that Netflix may grow subscribers without significantly growing revenue or generating incremental operating profit contribution."
- JPMorgan is looking for earnings of 57 cents per share. The firm is modeling for U.S. subs of 23.91 million and international subs of 1.73 million. JPMorgan sees limited impact on DVD subs with the new 56-day window from Warner, as most of those subs don't aim to watch new releases.
For the quarter, JPMorgan is watching for an update on U.S. Streaming profitability ramp. Netflix has hinted at 8 percent contribution margin, excluding certain costs, which should increase 100 basis points each quarter. JPMorgan thinks there's a possibility that the target will move higher as Streaming subs grow and fewer content deals become economical.
JPMorgan said, "Recent statements by CEO Reed Hastings suggest Netflix’s domestic subscribers began growing again in December after several months of steep declines—though this commentary appears in line with guidance provided in October."
- Dougherty & Co, is modeling for EPS of 44 cents and revs of $842.1 million. The firm sees 24.2 million paid subs (222.2 million streaming and 2 million DVD). Though the firm sees the U.S. market shaping up, competition and cost of content in the U.S. and Ireland will drive Netflix to a loss for 2012. Dougherty said, it will take "a couple of quarters for investors to gain confidence that subscriber traction in these new markets will be sufficient to offset the substantial up-front costs and put the company back on the track to profitability."
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
- Advance Auto Parts (AAP) PT Lowered to $43 at Truist Securities
- Mizuho Reiterates Outperform Rating on Broadcom Limited (AVGO) Into EPS
Create E-mail Alert Related Categories
Analyst Comments, EarningsRelated Entities
JPMorgan, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
