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Will Netflix's Recovery Survive Earnings Season?

Next Monday, Netflix (NASDAQ: NFLX  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. 

Few stocks have given investors a bumpier ride over the past several years than Netflix, which went from euphoria to heartbreak in late 2011 only to post huge gains over the past quarter. Now that investors are excited again, can Netflix deliver the results they want? Let's take an early look at what's been happening with Netflix over the past quarter and what we're likely to see in its report.

Stats on Netflix

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$1.02 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Netflix stream higher this quarter?
Analysts have gotten a lot more optimistic about Netflix in recent months, reversing initial estimates for continued losses in the just-finished quarter, and more than tripling their full-year 2013 consensus earnings estimates. The stock has responded with unbridled enthusiasm, soaring more than 70% since mid-January.

Netflix surprised investors back in January with a profitable quarter: Streaming margins expanded sharply, the company logged much higher streaming subscriber counts, and it noted better-than-expected retention of legacy DVD subscribers. Since then, Netflix has continued moving forward, reporting that viewers streamed 4 billion hours of content during the quarter, suggesting both continued subscriber growth and increased viewer engagement.

But not everyone is convinced that Netflix can produce the growth it needs to justify its valuation. Even CEO Reed Hastings has said that the company needs to make its service more compelling in order to reach its goals of having 50% to 75% of households subscribing to Netflix. In order to accomplish that, Netflix made a new content deal in January with Time Warner (NYSE: TWX  ) , giving it access to popular television series that will add to its expanding library of streaming options. It has also turned to Facebook to help bolster its social presence, building a Facebook app to allow viewers to share more easily what they're watching or putting on their queues.

Still, Netflix's competitors haven't been standing still. Amazon (NASDAQ: AMZN  ) remains a huge threat to Netflix, with Amazon's content deal with CBS to stream episodes of a new Stephen King-based drama just days after their initial airing. It's also bulking up its own video library. Scoring the exclusive rights to stream PBS hit Downton Abbey is another Amazon victory in the long content wars to come.

In Netflix's quarterly report, watch for a status report on how its international expansion efforts are faring. As the U.S. market gets more saturated, finding more subscribers overseas will become a much larger part of Netflix's business in the long run.

Learn more about how Netflix's domestic battles and international growth aspirations will affect the company by reading The Motley Fool's premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.

Click here to add Netflix to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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