Elizabeth Trotta

Netflix Earnings: The Show Goes On, Even if Profits Stall

The Exchange

Netflix (NFLX) might give finicky investors more reason to buy, hold or sell with its quarterly earnings after the bell -- but analysts say it likely won't have much to do with profits.

Analysts are looking for Netflix to swing to a loss of 27 cents a share on $866 million in revenue. The key metric, however, is subscription growth. The company will likely continue to get a "free pass" on overall profitability over the next few quarters, as investors focus instead on stabilizing domestic subscription growth and continued international expansion efforts, according to Piper Jaffray analyst Mike Olson.

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Olson is looking for 9.8 million U.S. DVD subscriptions, 23.2 million U.S. stream subscriptions, and 2.8 million international stream subscription. He says one wildcard is international subscriptions, given what appears to be an "aggressive" level of marketing in the U.K. in the first quarter.

Stock Roller Coaster

The stock has trudged back somewhat after a very public meltdown in the fall, when investors and customers revolted in the wake of the short-lived Qwikster split-off plan. As of Friday's close, shares were up 53% so far this year and have risen 66% since bottoming on Nov. 25. In fact, from that point in November though Friday's close, Netflix is the second-best stock on the Nasdaq 100, exceeded only by Seagate (STX), which is up 92.7%.

But, to keep this in perspective, Netflix shares are still down 65% from its 52-week high of $304.79.

New Competition

Barclays analyst Anthony DiClemente downgraded Netflix shares in early April based on new competitive threats that are hitting the subscription video on demand market just as digital content costs are increasing dramatically.

Amazon (AMZN) Prime's subscription video on demand market offering could eventually become a stand-alone product competing more directly with Netflix, as could Comcast's (CMCSA) Streampix service, wrote DiClemente.

"Lastly, we believe the proliferation of TV Everywhere threatens to cannibalize users' time spent viewing library content on connected-devices," he added.

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