Netflix, Inc. (Nasdaq: NFLX) shares are lower today, ahead of
the company's fourth quarter earnings release, expected out after
the market closes. Shares are down0.5% today.
NFLX is expected to report EPS of $0.71 with revs of $597.23
million. Last quarter, the Los Gatos, CA-based video rental service
provider posted EPS of $0.78, ex-items, on revs of $553.2 million,
topping consensus estimates. Looking at Q409, we see Netflix
produce EPS of $0.59, ex-items, paired with revs of $444.5 million,
topping Street views looking for EPS of $0.45 and revs of $444.5
Shares gained 13.6% through the quarter, to $175.70 at the end of
December. The stock is up 4.7% since then, and made a good run
through 2010, ending 228.5% higher.
A simple valuation puts Netflix with a forward P/E of 47.8x FY11
EPS estimates, comparable to 50.5x for Amazon.com (Nasdaq: AMZN).
Data from Bloomberg has 6 analysts with a Buy on NFLX, 18 with a
hold, and seven suggesting to Sell. The analyst price target
average is $159.5, with a high of $225 and low of $78. Shares have
traded in a range of $209.24 - $48.52 over the last 52-weeks.
Netflix issued an outlook with Q310 results calling for EPS of
$0.59 - $0.74 and revs of $586 - $598 million. Subs expected to end
at 19.0 - 19.7 million.
- Wedbush is looking for EPS of $0.75 with revs of $601
million. They believe that ending subs may come in higher than
their estimate of 19.7 million. Wedbush notes that the new
$7.99/month streaming package and higher prices for unlimited
plans will offset lower ARPU resulting from the migration of
existing customers to the streaming plan.
The firm notes that while Netflix should meet their expectations,
looking at the company longer term one might become concerned
with continued heavy spending on their streaming catalog, which
will be a drag on margins down the line. Wedbush estimates an
annual cost of $190 million for EPIX, $30 million for Starz
(which could potential swell to $200million if the license is
renewed) $60 million for other movie content, and $50 million for
other TV content, and the firm thinks that savings in postage
will not fully offset spiraling content costs.
Wedbush has an Underperform rating on the shares, with a price
target of $78.
- Dougherty & Company is looking for Q410 EPS of $0.73 on
revs of $595.5 million. They note that their model calls for a
59% increase in subs, a decline in churn, and 11.8% in operating
margins. They think that, at about 40.3x their FY11 EPS estimate,
the shares are priced for perfection. However, with their
estimate of EPS for FY12 of $5, they recommend to pick up shares
on any signs of weakness (specifically, at a $170 entry point).
They expect net ending subs of 19.465 million.
Key topics Dougherty notes include: a Canadian launch update, the
impact from Hulu Plus, "confirmation of the continuation of the
recent trend of rising consumption of streaming content paired
with lower per subscriber disc usage," any plans for entry into
additional international markets, ability to maintain operating
margins, is there a pick-up in Blu-ray based plans, an updates on
the Starz contract renewal.
Dougherty has a Neutral rating on the shares, with a price target
Two other items investors may be looking at: CFO replacement and
their progression with Facebook. On December 7, 2010, then-CFO
Barry McCarthy decided to leave the company to explore other
pursuits. Also, Netflix listed "Facebook Integration Engineer
Architect" as a job that their hiring for on their careers site.
Netflix has been a battleground between bulls and bears. Analysts
may ask about CEO Reed Hastings' rare move to
address short sellers in the media
Netflix, Inc. is expected to release their Q410 earnings on
Wednesday, January 26, 2011, at approximately 4:00pm EST. Stay
tuned to StreetInsider.com's
section to see our analysis of the highly-anticipated quarterly
results withi0 n seconds of their release.