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Q4 Preview: Netflix (NFLX) Future Lies in the Starz

Posted: 1/26/2011 9:57:00 AM
Referenced Stocks: AMZN;NFLX

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 million.

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 (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.

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's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.