Earnings season is here, and Netflix (NFLX -0.63%) shareholders are hoping that the premium streaming video leader isn't caught buffering. The shares hit a new 23-month high earlier this month. A strong report on Tuesday afternoon could send Netflix stock to a fresh two-year high.
A lot can go right. A lot can go wrong. Let's look at Netflix's own guidance and analyst expectations. Then let's pivot to see what bulls and bears are looking for when the streaming services pioneer steps up for its telltale financial update.
California streaming
Netflix is the world's most popular premium video service, with 247.2 million subscribers worldwide at the end of September. Its guidance in mid-October for the fresh financials it will discuss this week was encouraging. Netflix was modeling a record $8.69 billion in revenue for the holiday quarter, a 10.7% increase over the prior year. A nearly 11% year-over-year gain on the top line may not seem like much, but it would be the first time Netflix posts a double-digit percentage jump in revenue in two years.
The bottom line should pack even more octane. Its outlook calls for $956 million in earnings or $2.15 a share for the fourth quarter, several times over the depressed profit it posted a year earlier.
A lot has happened since Netflix took its last public look at the future three months ago. The SAG-AFTRA strike ended, reopening the domestic content pipeline but also accompanied by a spike in related costs. Hungry competitors have made the kind of moves you make when bellies grumble.
Analysts have gotten slightly more upbeat in recent weeks. They see the California-based entertainment pioneer earning $2.22 a share on $8.71 billion in revenue. Is it enough? If Netflix tops Wall Street's bottom-line target, it will be the company's fourth beat in a row.
Image source: Getty Images.
Changing channels
There's a lot going on in the streaming video space. Netflix and its rivals have been raising prices for their flagship offerings that are free of televised marketing missives, but also making sure that ad-supported options remain affordable to keep price sensitive customers from bailing.
However, Netflix competitors got a bit desperate heading into the holidays. They pumped out deeply discounted promotions for Black Friday, locking in subscribers but probably at the expense of average revenue per account contracting. Netflix continues to be the industry standard, and not just because it's the one generating gobs of net income while many of its rivals are streaming in the red. Don't sleep on that last point, as it finds rival services scaling back on content despite the higher price points. The competition is now even open to licensing content through Netflix as a side hustle to stay afloat.
There will be a shakeout. There may be consolidation. But all signs suggest that Netflix will continue to thrive as the top dog in streaming services stocks. Still, the bulls shouldn't be celebrating early. The stock is up 40% since the company announced third-quarter results three months ago. Expectations are high and rising. Netflix will need more than just an adequate report to keep the upticks coming.
