Netflix (NASDAQ: NFLX) announced its Q3 2013 earnings report yesterday after market close. The company reported a solid quarterly performance with the business reporting positives in all indicators of business performance.
Netflix Q3 2013 Financial Performance
The company registered a revenue growth of 22% on a Y/Y basis. The operating income for the quarter came in at $57 million for Q3 2013 against $16 million in the year ago quarter. The operating margins improved by 3 percentage points to 5.2%. The quarter saw a strong growth in the earnings per share (EPS) with the EPS increasing 4 times as compared to the previous quarter. The overseas operations saw a strong growth in Q3 with the overseas revenue jumping by 135% Y/Y.
Actual v/s Estimates
The quarterly performance came ahead of the analyst expectations with the quarterly earnings of 52 cents beating the analyst consensus by 8.3% and the revenue of $1.11 billion marginally ahead of the $1.1 billion analyst consensus estimate.
Stock Market Response
The stock price of Netflix jumped 6.4% in regular hours trading in expectations of a good quarterly performance. The investors weren't disappointed by the performance of the company, a fact well reflected by the 11% jump in the stock price in after-hours trade, following the earnings call.
Though the quarterly performance has been a tremendous improvement over the year ago period, we believe that a P/E of close to 300 makes the stock very expensive and we wouldn't invest our money into a stock with such an exorbitant price. The company has been trading at a significant premium to its historical P/E ratio. The P/E ratio prior to 2013 was below 100 whereas the stock has been trading at a P/E in excess of 400 for most part of the current year. We believe the stock price has climbed far ahead of the earnings making the stock a risky bet at its current price levels.
To see Netflix’s current price, please click here: (NASDAQ: NFLX)