Netflix's 49% Rally From Low Suggests Bet on Blowout Quarter

(Bloomberg) -- Netflix Inc. kicks off earnings season for media and tech companies with its shares up 49 percent from their December low, a clear sign investors expect another blockbuster quarter from the streaming-video leader.

As usual, subscriber additions will be under the magnifying glass, with Wall Street forecasting gains of 1.83 million domestically and 7.38 million internationally for the fourth quarter, according to data compiled by Bloomberg. Those are a little shy of the company’s own projections from October. Results are due after markets close Thursday.

Netflix gave investors even more to consider Tuesday, raising prices for its almost 60 million U.S. customers by $1 or $2 a month. That potentially adds a billion dollars or more in annual revenue -- a crucial sum since the company borrows regularly to finance its movie and TV budget. And for the first time, Netflix has said it will provide quarterly guidance for only new paid memberships, leaving out trial subscriptions.

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Investors who need something to worry about often zero in on the company’s spending. At the close of the third quarter, Netflix planned to spend $8.4 billion on programming over the coming 12 months. Working in the company’s favor has been the generous publicity it’s getting for original productions, which represent a growing part of the program budget.

The horror film “Bird Box,” starring Sandra Bullock, began streaming in late December and was viewed by 45 million subscribers. “Roma,” from director Alfonso Cuaron, is in the mix for the best-picture Oscar, according to awards oddsmakers.

Netflix's 49% Rally From Low Suggests Bet on Blowout Quarter

The Numbers

  • 4Q total streaming net streaming adds est. +9.2 million (average of 4 ests.)
    • 4Q domestic adds est. +1.83 million
    • 4Q international adds est. +7.38 million
  • 4Q paid net streaming adds est. +7.6 million (one est.)
  • 4Q revenue est. $4.21 billion (range $4.18 billion to $4.30 billion)
  • 4Q GAAP EPS est. 24c (range 20c to 32c)
  • 1Q GAAP EPS estimate 84c (range 51c to $1.49)
  • 1Q paid streaming net streaming adds est. 8.5 million (avg. of two)
    • 1Q domestic adds est. +2.3 million (one est.)
    • 1Q international adds est. +6.7 million (one est.)

More Data

  • 30 buys, 10 holds, 4 sells: avg PT $382
  • Implied 1-day share move following earnings: 8.0%
  • Shares rose after 6 of prior 12 earnings announcements
  • GAAP EPS beat estimates in 9 of past 12 quarters

Timing

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