Net­flix re­sults hinge on added ac­counts

Com­pany to re­port quar­terly re­sults Tues­day

The Mercury News - - Business + Technology - By Rex Crum rcrum@ba­yare­anews­group.com

Fans of the leg­endary comedic troupe Monty Python’s Fly­ing Cir­cus can now re­joice in that nearly ev­ery one of the group’s movies, live per­for­mance videos, and all four sea­sons of its ground­break­ing Bri­tish TV se­ries, is now stream­ing on Net­flix.

That’s all well and good for those who love Monty Python’s hu­mor. But to bor­row

from one of Monty Python’s most fa­mous sketches, Net­flix could face its own Span­ish In­qui­si­tion de­pend­ing on how the stream­ing TV gi­ant’s up­com­ing quar­terly

re­sults turn out.

Net­flix is sched­uled to de­liver its third-quar­ter re­sults af­ter the stock mar­ket closes Tues­day. Wall Street an­a­lysts are fore­cast­ing Net­flix to post a profit of 68 cents a share on rev­enue of $4 bil­lion, while Net­flix has said it ex­pects to earn 68 cents a share on $3.98 bil­lion in sales. Dur­ing the third quar­ter of 2017, Net­flix earned 29 cents a share on rev­enue of $2.99 bil­lion.

But while earn­ings and sales growth are nice, what drives those re­sults are Net­flix’s sub­scribers and their monthly sub­scrip­tion fees.

Net­flix ex­pected to add 5 mil­lion sub­scribers dur­ing July, Au­gust and Septem­ber, with 650,000 of those com­ing from the United States, and the re­main­ing 4.35 mil­lion from Net­flix’s in­ter­na­tional mar­kets. If Net­flix hits that 5 mil­lion fig­ure,

that would give it 135.14 mil­lion sub­scribers around the world.

But if it falls short, Net­flix will likely see a back­lash like it did three months ago, when Net­flix added 5.15 mil­lion to­tal sub­scribers dur­ing the sec­ond quar­ter. That amount missed the com­pany’s tar­get fore­cast by more than 1 mil­lion sub­scribers. At that time, Net­flix Chief Ex­ec­u­tive Reed Hast­ings

sounded not too con­cerned about the sub­scriber miss, say­ing on a con­fer­ence call, “We’ve seen this movie be­fore.”

Net­flix’s shares fell more than 5 per­cent the day af­ter its sec­ond-quar­ter re­port, and the com­pany’s stock price has given up more than 15 per­cent over the past three months. How­ever, even with Net­flix’s re­cent stock swoon, the com­pany’s shares are up by 77 per­cent since the start of the year.

UBS an­a­lyst Eric Sheri­dan said, “de­bates re­main

front and cen­ter” over mat­ters such as Net­flix’s sub­scriber per­for­mance in the short term, and the amount of money the com­pany spends on con­tent and mar­ket­ing.

How­ever, Sheri­dan, who on Wed­nes­day raised his price tar­get on Net­flix’s stock to $365 a share from $330, said in a re­search note, “A sub­scriber beat is likely go­ing to be the driver with this set of re­sults,” and he will be look­ing to­ward what the com­pany fore­casts for its fourth-quar­ter sub­scriber num­bers.

That quar­ter is ex­pected to be an­chored by the de­but of the fourth sea­son of “Nar­cos” and the fi­nal sea­son of the po­lit­i­cal drama “House of Cards.”

And should Net­flix meet its sub­scriber fore­casts on Tues­day, in­stead of fac­ing a Span­ish In­qui­si­tion on Wall Street, it may just end up singing “I’m OK,” from Monty Python’s “Lum­ber­jack Song” un­til its next quar­terly re­port in three months.

NET­FLIX

Net­flix shares are up 77 per­cent since the start of the year.

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