Why Netflix Is Back

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Netflix Inc. (NASDAQ: NFLX) released its most recent earnings report after the markets closed on Monday. Overall there was an incredible reaction to the report with the stock surging as much as 20%. So far this year the stock has actually traded down over 10% for most of 2016. This earnings report could signal the return of this streaming giant.

The company posted $0.12 in earnings per share (EPS) and $2.29 billion in revenue. Thomson Reuters had consensus estimates that called for $0.06 in EPS on $2.28 billion in revenue. The same period from last year posted $0.07 in EPS and $2.28 billion in revenue.

Domestically, revenue rose 23% year over year while the international segment revenue grew by 65%.

During this quarter, Netflix added 0.4 million members in the US versus its forecast of 0.3 million and 3.2 million members internationally versus 2.0 million. The over-performance was driven primarily by stronger than expected acquisition due to excitement around Netflix original content. Total net adds for the quarter was 3.57 million making a grand total of global paid memberships of 86.74 million.

In terms of guidance for the fourth quarter, Netflix expects to have $0.13 in EPS and $2.34 billion in revenue. The consensus estimates called for $0.07 in EPS on $2.4 billion in revenue.

For the fourth quarter, Netflix forecasts 5.2 million global net adds, with 1.45 million net adds in the US and 3.75 million new members internationally. Overall management is pleased with the results thus far as it expects the average selling price (ASP) to grow 12% from the first quarter of 2016 to the fourth quarter of this year. Internationally, the initial demand from its launch in Spain, Portugal and Italy in the fourth quarter will also affect the year-over-year net adds comparison.

On the books, cash, cash equivalents and short-term investments totaled $1.34 billion, versus $2.31 billion at the end of the previous year.

Shares of Netflix closed Monday down 1.7% at $99.80, with a consensus analyst price target of $103.98 and a 52-week trading range of $79.95 to $133.27. Following the release of the earnings report, the stock was up 20% at $119.82 in the after-hours trading session.

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