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The Story of Netflix Unfolds After Earnings

By Blake Bos - Apr 24, 2013 at 6:30PM

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Netflix explodes after a great earnings report. Now what?

In this video, Blake Bos reviews some key financial metrics for Netflix. The latest earnings report exceeded expectations for both revenues and income. However, The Big Picture is less than reassuring. Netflix needs to add subscribers to improve its profit margins and reduce its content cost per subscriber. Currently, Netflix profit per subscriber has fallen from $48 to $23 over the past few years.

Earnings rose on the strength of the increase in its subscriber base. To continue this earnings momentum, Netflix must continue adding new subscribers. There is competition out there -- for example, Amazon.com. How well Netflix can offer content at reasonable costs and increase subscribers will dictate how well it does in the future. Right now, Blake sees limited safety with Netflix at its current prices. He's staying out until the company demonstrates improving financial performance.

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