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Netflix Stock Has a Lot to Prove on Monday Afternoon

By Rick Munarriz - Oct 15, 2017 at 10:10AM

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Netflix sees 30% revenue growth and earnings more than doubling, but guidance will be what dictates the stock's chances of building on Friday's all-time highs.

There's a lot of positive momentum as Netflix (NFLX -0.98%) barrels toward Monday's pivotal quarterly report. The premium streaming juggernaut hit another all-time high on Friday, topping $200 for the first time on an intraday basis. 

The stock has soared 23% since the company posted its second-quarter financials three months ago, and that's the kind of helium that results in lofty expectations for the upcoming report. Netflix stock is on fire, and it's going to need another blowout performance to keep it that way.

Adam Sandler as Sandy Wexler in a Netflix original movie.

Image source: Netflix.

Mowing down projectionists

Netflix's guidance for the third quarter calls for revenue of $2.969 billion, 30% ahead of the prior year's showing. It sees profits nearly tripling to $0.32 a share, fueled by widening margins domestically and a return to profitability overseas. 

Netflix's mid-July guidance for the third quarter was ambitious, but the dot-com darling has been historically conservative. Investors have typically come to expect more out of Netflix, though Wall Street pros are generally perched on those numbers this time around. Analysts also see a profit of $0.32 a share on $2.97 billion in revenue in the quarterly letter that will go out shortly after Monday's market close. 

A lot has happened over the past three months. We've seen even old-school broadcasters beef up their digital initiatives, and Netflix has responded by loading up on ammo itself. However, the biggest thing Netflix will discuss is its decision earlier this month to increase prices on most of its plans for stateside users. Getting its streaming accounts to pay more is one way to revisit the company's upside potential, and the stock's been racing higher since its latest move. If guidance holds up on the subscriber front, it wouldn't be a surprise to see revenue moving higher in the fourth quarter, with the bottom line climbing even faster.

Subscriber guidance will be a big number to watch. Three months ago, Netflix was targeting 108.35 million streaming accounts worldwide by the end of September, a figure that shouldn't be hard to achieve, given the well-received shows it has added both here and abroad during the third quarter.

Its outlook for year-end subscribers, particularly its stateside forecast, also bears watching, given the 10% rate increase for its most popular domestic streaming plan that kicked in after the third quarter came to a close.

The stock's high, and expectations are reasonably elevated. If Netflix wants to trigger another short squeeze, it knows what it will need to do on Monday.

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