Netflix Q3 2013 Earnings Preview

Netflix Q3 2013 earnings preview

Netflix (NASDAQ: NFLX) is due to announce its Q3 2013 earnings after market close on Monday. The company has made some good moves during the quarter and here is what we will be expecting in today’s earnings report.

The company had a good Q2 2013. During the second quarter Netflix registered rapid topline growth even as it improved its operating margins on a Y/Y basis.

Netflix Q2 2013 performance

The last quarter saw the revenue jump by 20% on a Y/Y basis while the operating margins improved 4% points, a significant fact considering the growth rate of Netflix. The EPS saw a whopping Y/Y jump of over 345%, a fact well appreciated by the market. The stock has jumped by over 26% in the last three months following the second quarter earnings call on July 22, 2013.

Netflix Q3 2013: An overview

The growth in the company’s subscriber base has majorly driven the revenue growth at the company over the last few quarters. The current growth in the subscriber base has largely been fuelled by its expansion into overseas markets. The month of July 2013 saw the company’s UK subscribers touching 1.5 million users, 18 months since Netflix service was launched in the UK. A recent report released by Media Technology Monitor states that nearly 25% of English speaking Canadians (Anglophone Canadians) are now subscribers of the Netflix service, which is a near 100% increase from last spring. The company also signed a deal with The Weinstein Company LLC, a major American film studio and maker of popular titles such as The King’s speech, Scary Movie, The Great Debaters, etc. Under the new agreement, Netflix members will get to instantly access the movie releases from the TWC and Dimension titles, starting from its first theatrically released feature film in 2016. The total Netflix user base, which stood at 27 million in December 2012, currently exceeds 38 million, a nine month increase of 41%.

While that was the growth story of Netflix for Q3 2013, the quarter also saw the company take steps to improve its bottom line. The most significant was the company’s advances in content generation. The company’s in-house generated titles, ‘House of Cards’ and ‘Orange is the new Black’ have gained popularity and widespread followership among its viewers. The move into content generation will go a long way in helping the company cut content costs, which account for close to 70% of the company’s revenues.  However the content generation business is more risky compared to the video streaming/content distribution business which Netflix had started with.

Netflix Earnings history

According to streetinsider.com Netflix has beaten analyst estimates of EPS for the last 12 quarters with an average EPS beat percentage of over 162%. The current analyst consensus estimate for Q3 2013 is 48 cents against 13 cents in the Q2 2012. The earnings history has been nothing short of extraordinary and the company is expected to trump analyst estimates for Q3 2013. It will be interesting to see what the exact numbers come in at.

Conclusion

The company has taken major steps to improve its bottom line. We expect the company to report improved operating margins accompanied by strong subscriber base growth in Q3 2013. Netflix stock closed the last trading session at a price of $ 333.5, registering a one day gain of 1.03%. We will bring you the actual numbers tomorrow, so come back to see our latest update on Netflix Q3 2013 performance.

To see Netflix’s current price, please click here: (NASDAQ: NFLX)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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