Netflix Earnings Preview

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Netflix Inc. (NASDAQ: NFLX) is on the earnings calendar after the markets close on Monday, and the trading community is on edge for this earnings report. With a huge turnaround and with many improvements having been made to the business, the short interest is actually at the lowest level now in more than a year.

Thomson Reuters has its consensus estimates of $0.18 in earnings per share and for 17% sales growth to $1.02 billion. Be advised that this is expected to mark the first single quarter where Netflix had $1 billion in quarterly revenues. We would also note that a boutique firm called B. Riley raised its official analyst rating just this morning ahead of earnings. That being said, the upgrade was only to Neutral from Sell.

Note that Netflix has risen handily, and at one brief point it was up 100% in 2013 and up close to 300% from last year’s lows. Now Carl Icahn is firmly behind the company. Furthermore, Netflix trades at an expected 130 times 2013 earnings and 60 times expected 2014 earnings. Revenues are expected to climb to $4.27 billion in 2013 and more than $4.9 billion in 2014.

A review of options trading shows that options traders have priced in a move of up to about 9% in either direction ahead of the earnings report. Bloomberg even gave a larger “up to” estimate than that. Here are the key moving averages: 20-day at $173.81, 50-day at $180.11 and 200-day at $105.89. The consensus price targets have a wide disparity between mean and media, but splitting the two would generate a consensus target of close to $155 for Netflix shares, as analysts were way behind the curve here on the recovery.

Netflix is trading up 5% around the $171.50 mark ahead of earnings, against a 52-week range of $52.81 to $197.62.