What's Coming For Netflix This Earnings Season?

According to analysts Michael Pachter, Alicia Reese and Nick McKay, Wedbush expects Netflix’s third-quarter results to beat the modest guidance. The experts expect earnings of $0.07 per share on revenue of $1.77 billion, slightly below the Street’s consensus (which calls for earnings of $0.08 per share on revenue of $1.75 billion), but in line with guidance for EPS of $0.07.

In the streaming sub net adds field, the firm is modeling 1.25 million local net adds and 2.5 million international streaming sub net adds, versus guidance of 1.15 million and 2.4 million, respectively.

Related Link: Amazon Releases First Look At New Series To Rival Netflix's "House Of Cards" And "Orange Is The New Black"

Catalysts And Drivers

The analysts assured that Netflix’s latest originals and its partnerships with DISH Network Corp DISH and Vodafone Group Plc (ADR) VOD probably drove the expected beat in subs.

Moreover, the Japan launch in September likely supported overseas momentum. Finally, they noted that modest marketing over the quarter could likely indicate “subs tracked above guidance.”

Looking Ahead

Going forward, Wedbush analysts expect the company to guide fourth-quarter streaming sub net adds of 2 million (domestic) and 2.5 million (international), in line with their estimates.

The report mentioned two other issues to take into account when investing in Netflix, supporting the firm’s Underperform thesis:

• 1. The company recently increased the price of its standard streaming service for new members from $8.99 to $9.99. While the impact over user attrition is not expected to be significant, the analysts believe “the increase reflects increasing content costs rather than pricing power, and expect most, if not all, of the incremental revenue to be absorbed by spending.”
• 2. Amazon.com, Inc. AMZN and Hulu “continue to ramp up the competition on Netflix.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

Image Credit: Public Domain