Netflix (Nasdaq: NFLX) shares are trading stronger Monday
heading into second-quarter earnings which are expected out after
the market closes in just several hours.
The Street is looking for EPS of $1.11 on revenue of $791.48
million. The number's suggest earnings would be flat sequentially,
and up 39 percent from the 80 cents per share earned in the same
period last year.
Data from Streetinsider
has Netflix surprising to the upside on average of 11.5 percent
over the last three earnings reports.
Netflix's stock price gained 10.5 percent through the quarter is up
50 percent so far in 2011. Netflix has traded in a range of $95.33
to $304.79 over the last 52-weeks, recently hitting an all-time
high on July 13th this year.
has ten analysts with a Buy rating on Netflix, eight are Neutral,
and six have a Sell. The analyst price target average is $275, with
a low of $100 and high of $360.
News Monday suggests Netflix could potentially
enter a deal
with DreamWorks Animation (
), though nothing has been confirmed by either company yet.
Also, on every investors' mind will be an update from management on
the recent controversial price increase and the LatAm expansion
- Goldman Sachs expects Netflix to beat views on increased
geographic distribution and the potential for faster
physical-to-digital transition boosting margin. Goldman sees
earnings of $1.26 per share and revenue of $792 million. The firm
believes Netflix ended the latest quarter with 25.7 million subs.
"We expect ARPU to decline 11% yoy and 3% qoq to $10.70, as the
majority of new gross adds take streaming only plans, current
subscribers trade down to less expensive plans, and international
subscribers take streaming-only plans, offset somewhat by a price
increase in November 2010 for subscribers taking DVDs."
Goldman believes key focus points on the call should include
something about Latin America expansion, the price increase, and
further color about contract negotiations.
- Wedbush is looking for earnings of $1.15 per share, revs of
$791 million, and ending subs of 25.7 million. Wedbush believes
Netflix will limit forward guidance on the call, due to the
recent price increase, data cap, negotiations with Starz, and
content costs. With pricing, the firm believes Netflix customers
will offset higher prices with migration into lower priced plans.
Postage savings should be limited.
On costs, Wedbush believes part of the price increase was due to
content costs escalating faster than revs. "Based upon recent
deals, we believe that content costs are tracking to $2.2 - 2.5
billion in 2012, up from our earlier estimate of $1.6 - 2.2
billion. The launch of a streaming service in Latin America this
year should add significantly to streaming costs."
- Dawson James Securities sees EPS of $1.03 on revs of $790
million. Dawson argues
competition from Amazon
(Nasdaq: AMZN), Google (Nasdaq: GOOG) (via YouTube), and Hulu,
among others, is heating up. Like Wedbush, Dawson is also weary
about the increasing costs of content, which are only likely to
go up. The firm believes Level 3's (Nasdaq: LVLT) recent
acquisition of Global Crossing (Nasdaq: GLBC) could shift
bandwidth pricing power "towards the content delivery network
providers." Many providers are also cutting unlimited streaming,
meaning Netflix might end up costing much more to subs than just
a subscription price.
Stay tuned to StreetInsider.com's
section to see our analysis of the highly-anticipated quarterly
results within seconds of the release.