Netflix’s Q2 earnings topped earnings estimates but missed the estimates on revenue ever so slightly. Revenue increased to $1.64 billion from $1.34 billion a year ago. International revenue grew 48 percent during the quarter despite currency headwinds. Analysts had expected the company to report earnings of 4 cents a share on $1.65 billion in revenue- the company posted second-quarter earnings of 6 cents per share, down from 16 cents a share in the year-earlier period.
The share gapped higher the next day by >10% to $75.71 from $67.36.
This time around BBG consensus expectations is for EPS of $0.07 on $1.752b revenue. The average implied move on the day is 13.77% which from current levels (and assuming it’ll be upside) would take us back to the highs last seen in May around $129 per share. Downside, it would mean a return to the $98 per share marker and would mean a pull back through both the 50 and 100 DMAs and a break of a 12 month uptrend. Notable is that the 50 DMA is flattening – but given that Netflix saw a 33.87% correction from May to August and has since recovered over 60% of that downside move – the $109 level is the line in the sand in terms of support.
The thing about these new-fangled companies like Facebook, Twitter etc. is that the accounting fundamentals are one thing, the subscriber/monthly active users are what is really checked. At the last earnings release the company reported a record 3.28 million net new additions, topping estimates. Analysts had expected 2.46 million net additions.
Netflix’s prediction back then was that it would see third quarter growth at 1.15 million U.S. streaming customers and 2.4 million international customers — additions that would push the provider's membership to more than 70 million.
Many analysts actually expect that to be exceeded – thus watch for any beat on sub numbers – this will be the lynchpin to any upside move in the share price.
Netflix is definitely facing growing competition from the likes of Amazon and Comcast but the announcement of new original movies/series may keep its subscribers happy for now. Netflix's $1 price increase to its monthly subscription is unlikely to be even a speed bump on the streaming video leader's road to continued growth.
The current average target price is $119 (12 month) with the breakdown of broker ratings as follows : Buy/Hold/Sell = 23/17/6.