Streaming-video veteran Netflix (NFLX 2.50%) will publish results for the fourth quarter of 2018 after the closing bell on Thursday, Jan. 17. The company didn't always live up to its own (or Wall Street's) expectations last year, and the stock chart would serve as a great template for a thrilling roller coaster.
With that in mind, here are the three most important things to keep an eye on in Netflix's next earnings release.
1. Subscriber additions
Sure, Netflix will report the same basic numbers as every other company. Earnings should land near $0.23 per share on roughly $4.2 billion in top-line revenues, according to management's guidance figures. But investors and analysts will shrug these numbers off in a hurry if there are any surprises -- positive or negative -- when it comes to subscriber additions.
The guidance targets point to approximately 1.5 million net new additions to the paid domestic subscriber counts, compared with the third-quarter figures. Netflix also hopes to add 6.1 million paid international accounts during the quarter for a global total of 7.6 million net new subscribers.
The company fell short of these crucial guidance figures in the second quarter, and share prices immediately started sliding lower. Subscriber addition trends are seen as an indicator of Netflix's long-term growth prospects, so every eye will turn to this portion of the report first.
2. Price increases and guidance
Hot off the presses, Netflix raised its domestic subscription prices on Tuesday. Every pricing plan saw an immediate increase for new subscribers, from the basic single-stream service to the deluxe option with Ultra HD picture quality and up to four concurrent plays per account. The increases range from 12.5% to 18% and will start rolling out to existing subscribers as well over the next three months.
The pricing changes will obviously boost Netflix's revenues per subscriber but skeptics might wonder how they will affect the subscriber counts. Analysts will surely prod management for more detail on what effects this move might have on the company's growth trends. Is Netflix simply boosting its revenues and profits without any real downside or will this be the second coming of Qwikster?
Color commentary on this topic may move the stock as effectively as those all-important subscriber results.
3. Cash flows
Finally, Netflix has a tendency to use more cash than its subscription services can produce. This strategy springs from the high cash costs of producing a lot of original content and has kept Netflix's free cash flows at roughly $2 billion of red ink over the past couple of years.
Management often says the negative cash generation will continue for several years, but also that there should be a cash-making light at the end of the tunnel. Year-end reports like this one would be more likely than the interim quarterly updates to contain new hints or outright statements of intent for the cash-flow timeline.
If nothing else, management may keep the door open for new debt papers or stock sales to keep the cash churn going. A simple lack of debt-raising comments could mean that the end of billion-dollar cash burns is drawing near.
Check out the latest Netflix earnings call transcript.