Netflix Earnings: Can the Video-Streamer Outpace Amazon?

Netflix has performed well over the past year, but does its mild pullback recently point to stronger competition from Amazon, Outerwall, and other video-content delivery alternatives?

Jan 20, 2014 at 12:35PM

Netflix (NASDAQ:NFLX) will release its quarterly report on Wednesday, and even though the stock has soared over the past year, a more recent pullback has led to some nervousness about the coming Netflix earnings report. As competitors (NASDAQ:AMZN) and others on the video-streaming front as well as Outerwall (NASDAQ:OUTR) and its continued Redbox offerings seek to overcome Netflix's first-mover advantage, Netflix has to make the most of its growth opportunities while facing the challenge of rising content costs.

Netflix has seen wild oscillations in sentiment throughout its history, going from euphoria to despair and back to euphoria in just a few short years. Right now, Netflix has been riding on solid growth, but the question that the stock's increasingly rich valuation raises is whether the company can keep growing fast enough to avoid disappointing investors. 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.

Source: Netflix.

Stats on Netflix

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$1.17 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's next for Netflix earnings?
Analysts have gotten a lot more upbeat about Netflix earnings in recent months, raising their fourth-quarter estimates by $0.20 per share and boosting full-year 2014 projections above the $4 per share mark. The stock has inched up about 3% since mid-October, but it has given up more than $50 per share in gains in less than a month.

Netflix started the quarter with solid positive momentum, as the company's third-quarter earnings report showed a lot of good signs for the video-streaming giant. Revenue jumped 22%, and earnings quadrupled on substantial gains in the number of its streaming subscribers, as Netflix added 1.29 million new paying members domestically. International revenue more than doubled, and Netflix saw 1.44 million more subscriber additions abroad to add to its good fortune. Positive guidance for the fourth quarter ramped up expectations among investors, who now hope to see gains of more than 2 million new domestic subscribers for the just-ended quarter. Moreover, Netflix has successfully managed to move most of its customers from DVD service to streaming, which is something that Outerwall's Redbox continues to struggle to achieve.

But Netflix won't have a free ride in the next wave of streaming growth. Amazon has used its Prime service to drive streaming-video growth, and the company's willingness to do whatever it takes to build a customer base even at the expense of profit margins poses a big threat to Netflix. Moreover, as the companies start to vie directly to build up content libraries, it could raise expenses for both Amazon and Netflix, potentially putting Netflix on the defensive as its investors expect more immediate profitability.

Analysts also fear that Hulu could pose a competitive threat. Morgan Stanley downgraded Netflix stock earlier this month, citing both Hulu and Amazon as weighing on Netflix's growth prospects. Given Hulu's high-profile owners, which make up some of the biggest content-producers in the industry, Netflix could find itself having to deal with high-paced growth from Hulu threatening to thwart its efforts to obtain high-quality content at the prices it wants to pay.

Perhaps the biggest worry investors have now is the recent Verizon (NYSE:VZ) victory over the FCC that could bring about the end of net neutrality. For years, broadband providers have hoped to charge high-bandwidth users for the disproportionate costs they incur, and the federal appeals court decision could eventually give Verizon and other Internet providers the ability to make Netflix pay more to make its service available to users. The question, though, is whether the resulting backlash among Internet customers would do more harm than good to Verizon and its peers, making them step back and restore Netflix availability in a cost-neutral way.

In the Netflix earnings report, watch for CEO Reed Hastings to provide more color on its expected response to the net neutrality debate as well as his view of strategic growth in an increasingly competitive environment. Netflix needs to demonstrate its continued superiority in order to keep its share price moving higher.

Look beyond Netflix for the biggest gains
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Hint: Netflix isn't one of them. Click here for their names.

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

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends and owns shares of and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers