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Netflix Reports Earnings Today: Will It Top or Flop?

Tirthankar Chakraborty

Netflix, Inc NFLX is set to report second-quarter results, after the closing bell on Jul 17. The company saw superb revenue growth in the first quarter on higher subscribers in the United States and international markets. The second-quarter count is expected to be higher.

This time around, Netflix is under tremendous pressure as content producers are now planning their own streaming services. Let us, thus, take a closer look at the factors that will influence Netflix’s results this earnings season.

Netflix to Cross 150M Subscriber Count

Netflix is set to surpass 150 million paid subscriber base when it reports second-quarter earnings. At the end of the first quarter, Netflix had nearly 148.9 million subscribers. The streaming video service giant expects to add 5 million paid subscribers in the second quarter, slightly lower than what analysts’ have expected.

Two years back, Netflix crossed the coveted 100-million paid subscriber number and has been expanding across the globe ever since. Analysts expect Netflix to beat 200-million customer count by the end of 2020.

If we look at the company’s subscriber base, it is evenly split between U.S. and international customers. Netflix, in the second quarter, expects about 95 million subscribers or more than 60% to be from outside the United States. And market pundits further expect Netflix to exceed the 200-million mark by 2020 with nearly 130 million foreign subscribers.

Competition Heats Up

But, why is domestic subscriber growth slowing down? This is because Netflix’s former content partners have now started their own streaming services, with many others in the process of setting up their own platforms.

Notable among them is The Walt Disney Company DIS as it continues to remove its content from Netflix to place on its own service. Lest we forget, Disney originals such as Moana is already out of Netflix’s list of programs.

Credit Suisse analysts did point out that “Disney— with its big-screen dominance — is seen as Netflix’s biggest threat. While we do not see Disney+ competing with Netflix for consumer attention and wallet, Disney is certainly competing for investor attention and wallet.”

To top it, WarnerMedia’s HBO Max will be showcasing Friends instead of Netflix, and NBCUniversal is now planning to pull back licensing of Netflix’s most-viewed The Office.

Despite all odds, Chief Executive Reed Hastings is pretty confident. Management believes that the current streaming rivals as well as offerings from Disney are temporary blips, given Netflix’s huge customer base and wide range of entertainment sources.

Netflix to Post Strong Top-Line Growth

Even though competition heated up for streaming viewership, subscriber count is expected to have expanded in the second quarter, which will eventually boost revenue growth. Netflix, thus, is widely expected to post revenues of nearly $4.9 billion for the second quarter, up from around $3.9 billion a year ago.

The Zacks Rank #3 (Hold) company also has an Earnings ESP of +5.99%. Our recent 10-year backtest results show that stocks that have a positive Earnings ESP and a Zacks Rank #3 or better come up with a positive surprise nearly 70% of times, and have returned more than 28% on average in annual returns. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Netflix, Inc. Price and EPS Surprise


Netflix, Inc. Price and EPS Surprise

Netflix, Inc. price-eps-surprise | Netflix, Inc. Quote

Positive results, no doubt, will lead to a rally in the share price. Thus, the company’s expected earnings growth rate for the current year is 25%, against the Broadcast Radio and Television industry’s estimated decline of 4.6%. Actually, the company has outperformed the broader industry so far this year (+36.7% vs +29.6%).


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