Netflix, Inc. (NASDAQ: NFLX) will post its fourth-quarter 2013 financial results and business outlook on its investor relations website on Jan.22, 2014, at approximately 1:05 p.m. Pacific Time. The company will host a live video discussion about its financial results and business outlook at 2:00 p.m. Pacific Time.
Netflix is the world's leading Internet television network with more than 40 million members in 40 countries enjoying more than one billion hours of TV shows and movies per month, including original series.
Wall Street expects Netflix to earn 66 cents a share, according to analysts polled by Thomson Reuters. The consensus estimate implies more than five fold increase from 13 cents it earned last year. The company expects fourth quarter earnings of 47 to 73 cents a share.
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Netflix's earnings have managed to top Street view thrice in the past four quarters, with upside surprises in the range 6.10 percent to 200 percent.
Over the past three months, the consensus estimate increased significantly, 20 cents, indicating bullish expectations from the Street. One analyst has raised profit view of the company in the last 30 days.
Quarterly revenue is expected to rise 23.3 percent to $1.17 billion from $945.24 million in the same quarter last year.
Subscriber additions remain the key metric for Netflix, especially in domestic region. Investors would be focusing on the growth in its U.S. streaming subscriber base. It appears to be on the path to adding approximately 5 million subscribers per year for the foreseeable future. Netflix added 1.3 million U.S. subscribers in the third quarter and ended September period with 31.1 million.
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Netflix expects fourth quarter domestic streaming members of 32.7 to 33.5 million and paid members between 31.1 and 31.8 million. The company expects fourth quarter net additions to be flat with last year, and to expand its contribution margin about 400 basis points year-over-year (YoY) to about 23 percent. The unit is set to generate revenue of $731 million to $741 million and profit of $165 million to $177 million.
Moreover, the Street will look at how the company's international business is faring. The company recently launched in Netherlands after UK/Ireland and Latin America.
For the third quarter, international net additions were way up from the prior year at 1.4 million new members. Netflix sees continued momentum and about 1.3 million net additions for the fourth quarter, ending 2013 with 10.5 million international members.
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Netflix predicts international membership of 10.1 to 10.9 million in the fourth quarter, with paid members between 9.1 and 9.7 million. The division is projected to generate revenue of $210 million to $224 million. However, given increased investments, the segment would post a loss.
Netflix has been adding original and exclusive content to its streaming library, which seems to be paying off. TV series such as House of Cards, Lilyhammer, and Arrested Development are drawing a lot of audiences, resulting in higher sign ups.
The fourth quarter saw the premiere of its inaugural second season of Lilyhammer. It also launched its first animated original series with Dreamworks Animation, Turbo F.A.S.T.
During the quarter, Netflix and CBS announced a content licensing agreement in which all eight seasons of the SHOWTIME drama "Dexter" will become available for Netflix members in the United States.
The company plans to double its content investments in 2014. Coming to Netflix in 2014 will be second seasons of House of Cards, Orange is the New Black, Derek and Hemlock Grove.
Further, the company is improving streaming experience. It recently rolled out profiles features, allowing households distinct "profiles" for different members or viewing tastes within their home. This enables Netflix to provide a much more personalized experience for its members.
The key focus on the conference call would be the Net Neutrality rules and its impact on the company. Shares of Netflix have fallen as much as 5 percent after a federal appeals court's decision to strike down the FCC's net neutrality rule, which prohibits wireline service providers from discriminating against certain types of data traffic.
If this portion of FCC rule is gone, then streaming services such as Netflix and Amazon may need to pay higher fees to ISPs such as Verizon (NYSE:VZ) as their services consume heavy bandwidth. Moreover, Netflix and Amazon.com, Inc. (NASDAQ: AMZN) may need to change their pricing structure; otherwise, they need to incur heavy losses, lose customers or hurt margins. Investors may look at Netflix's strategy to counter this development.
The company may also be questioned over its new plans, which is supposed to rival Amazon Prime. Netflix is experimenting a $6.99 a month plan that allows only one video stream to be watched at once, and a $9.99-a-month plan that allows three streams at one time.
Netflix' moves surprised Wall Street, which was expecting the company to increase the price. This is a significant aspect of the long-term bull thesis on the stock and is needed to offset rising content costs. The Street may eager to know the traction of new plans with customers.
In addition, the Netflix may be surrounded with questions over competitive trends and its plans to partner with U.S. pay-TV operators to expand its domestic streaming business. The fourth quarter outlook would also be a focus point.
For the third quarter, Los Gatos, California-based Netflix's profit soared to $31.8 million or 52 cents a share from $7.7 million or 13 cents a share last year. Revenues for the quarter grew to $1.11 billion from $905.1 million last year.
NFLX stock, which traded in the 52-week range of $96.59 to $389.16, trades 83 times its forward earnings. They have dropped 6.5 percent since the last quarterly report but surged 240 percent in the last year.
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