Netflix Has a Lot to Prove on Monday

When Netflix (NASDAQ: NFLX  ) reports quarterly results tomorrow afternoon, it won't be a quiet affair. The company that got its start with its signature red mailers is no shrinking violet. The conference call is being staged as an "earnings interview" with CEO Reed Hastings and CFO David Wells discussing results, as BTIG Research analyst Rich Greenfield and CNBC's Julia Boorstin moderate the event.

Netflix had better live up to the hype. The stock has popped fivefold since bottoming out last summer, and expectations are high for the financials that will be revealed a few minutes after the market closes on Monday -- and nearly two hours before the live video earnings call.

The stock hit yet another 52-week high on Thursday, and we're now closing in on the stock's all-time high of $304.79 back in 2011 -- a level that seemed unlikely to be revisited anytime soon after the stock began to tank later that year.

Wall Street sees revenue climbing 21% to $1.07 billion, with profitability more than tripling to $0.40 a share.

Netflix closed out the first quarter with 36.2 million streaming subscribers worldwide, and it's a safe bet that the service's audience has grown substantially in the past three months. Back in April, Netflix's guidance was for its global streaming membership number count to clock in between 36.7 million and 37.95 million. It would be a shock if Netflix landed at the low end of its range. It wouldn't be a surprise if Netflix tops 38 million.

There has been little -- outside of perhaps the late May departure of popular Viacom (NASDAQ: VIA  ) content -- to push customers out the door. Unlike cable and satellite television companies with their annual increases, Netflix isn't budging from $7.99 a month. The economy has improved. After losing SpongeBob SquarePants, Dora the Explorer, and South Park in the Viacom purge, Netflix has bounced back with even more content.

Jim Cramer has even made a sound argument that Netflix is a stealth housing play.

Then we also get to the original programming push that nabbed Netflix's first-run streaming shows a whopping 14 Emmy nominations last week. Do you really think folks will be quick to nix a $7.99-a-month service that they're actually using, as Netflix streams more than a billion hours of content a month?

Yes, there will be plenty to prove come Monday. Did subscriber growth outpace guidance? Did losses overseas narrow to the point where Netflix can point to a period of profitability outside the U.S.? Can its declining DVD business stabilize?

There will be plenty of questions that a buoyant share price requires be answered correctly. This will be an interesting "earnings interview" indeed.

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  • Report this Comment On July 21, 2013, at 2:16 PM, SpecialK007A wrote:

    The problem -- at least for me -- is the lack of good streaming content. I prefer to watch movies this way, but Netflix continues to limit choices. Right now, they're about the only game in town, but the opportunity is ripe for someone to come up with a better system. I've pretty much given up on broadcast and cable TV, as there is too much junk programming and far too many commercials and interruptions. I'm about to give up on satellite radio, too -- if I have to subscribe, I shouldn't also have to listen to advertisements. I have no doubt that Netflix will be doing well financially since they're a fairly unique service, but some innovator out there should be able to come up with something better.

  • Report this Comment On July 21, 2013, at 5:04 PM, ArmyDaveNY wrote:

    SpecialK007A is spot on. I too am looking for options. I have very little interest in their original programming and instead want movies. From the beginning I noticed that the online service is lacking the choice the mail service had. Worse, the online service is getting worse. While there are some good new movies, there are far more that are ten or more years old that I also want to watch. Some of the unavailable titles were quite surprising. These include Casablanca, Young Frankenstein, Scarface (the third version with Al Pacino), Our Man Flint, The Pink Panther, etc.

    I have already begun the search for other options. I have Amazon Prime, mostly for the shipping, but then I discovered the movies. I also have a basic Hulu account and am looking at Hulu Plus. I would like to see what else others are looking at.

    The end result is that they may be eating their own lunch. Another possibility is that their current business model is unsustainable and they need to find other ways to make money while hiding the fact that they can't afford the licenses and still make money. Pandora is having similar problems. May I should continue to buy DVDs and CDs, build my library, and stop wasting time with streaming! It's also better when the Internet and/or power is out (I have back up power so I'm good!)

  • Report this Comment On July 21, 2013, at 7:22 PM, poornamelessme wrote:

    My issue with Netflix has more to do with the DVD side of things than streaming. Their streaming selection stinks, but it always stunk. .

    I have read where their DVD/Bluray side of things is a cash cow, yet they act like they never need to feed or take care of that cow. They have minimized new title purchases and don't replace old/broken DVDs over time. Early on, Netflix had pretty much every title available on DVD ... now it's rather common to see popular older movies 'not available'.

    I realize streaming is their growth market and physical rentals are slipping, but it's not like streaming can simply replace the DVD/Bluray side of things completely.

  • Report this Comment On July 21, 2013, at 7:55 PM, secretsavanna wrote:

    whatever happened to that wal mart lawsuit with netflix???????????

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