What to Expect From Netflix Earnings After the Close

October 17, 2016 by Chris Lange

It doesn’t look like business as usual for Netflix Inc. (NASDAQ: NFLX) so far this year, with the stock down about 10%. In years past, this company was known for its rapid growth and global expansion, but it seems that these numbers are slowing. This is all to consider before the company reports its most recent financial results after the markets close on Monday.

The consensus estimates from Thomson Reuters call for $0.06 in earnings per share (EPS) and $2.28 billion in revenue. In the same period of last year, Netflix posted EPS of $0.07 and revenue of $1.74 billion.

Netflix added only 1.68 million subscribers in its most recently reported quarter. Only 160,000 were in the United States. While Netflix has 83.2 million customers worldwide, it also has huge investments in original programming. If Netflix growth flatlines, theses costs become a greater burden, margins erode and Netflix starts to look like other broken growth businesses.

In its previous earnings report, the company forecast that net additions would be 2.3 million in the third quarter, which would make a grand total of 85.48 million subscribers.

Keep in mind that Netflix always screens out as an expensive stock. It is worth almost $43.5 billion in market capitalization, and growth trends in the United States have become mixed. Whether the international growth expectations can outweigh domestic price hike controversies remains up for debate. The stock is valued at over 350 times current earnings expectations and at over 100 times expected 2017 earnings. Even with an expected 20% revenue growth, these levels look astronomical.

Prior to the release of the earnings report, a few analysts weighed in on Netflix:

  • MKM Partners reiterated a Buy rating with a $130 price target.
  • Nomura reiterated a Buy rating with a $110 price target.
  • Wedbush has a Sell rating with a $45 price target.
  • Cowen reiterated an Outperform rating and a $110 price target.
  • Jefferies reiterated an Underperform rating with a $76 price target.
  • Raymond James has a Buy rating with a $120 price target.
  • Deutsche Bank has a Sell rating with a $90 price target.
  • JPMorgan has an Overweight rating with a $125 price target.

So far in 2016, Netflix has actually underperformed the broad markets, with the stock down 11%. Over the past 52 weeks, the stock is more flat.

Shares of Netflix closed Friday at $101.47, with a consensus analyst price target of $103.98 and a 52-week trading range of $79.95 to $133.27. The stock was down 0.8% at $100.70 in early trading indications Monday.

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