Netflix Earnings: Is an Earnings Beat on the Horizon?

With Netflix earnings due out today, here are the metrics and story lines investors will want to watch.

Andrew Tonner
Andrew Tonner
Jul 21, 2014 at 10:27AM
Consumer Goods

2014 has proven to be another stellar year for shareholders of online streaming powerhouse Netflix (NASDAQ:NFLX). The company's share performance has trounced the broad market indexes like the Nasdaq, as well as other rivals like (NASDAQ:AMZN).

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With Netflix earnings due out on after market close today, ahead of's report later in the week, the ongoing streaming wars between and Netflix will undoubtedly garner plenty of attention.

Netflix earnings: Time to get excited?
There's plenty of reason to believe that Netflix earnings could hold more positive news for investors. Even as it has continued a torrid international expansion, Netflix has also been able to grow its profits to an impressive degree during the past several years.

The key here is that Netflix typically incurs substantial up-front costs whenever it enters a new market, which results in early negative contribution margins, a key internal metric that Netflix uses to monitor the financial health of its operations in a given market. And as those up-front costs decline, and Netflix adds subscribers in a given geographic region, the contribution margins in new markets can switch from negative to positive in relatively short order.

Recently, analysts have postulated that this very scenario, in key international markets like Latin America and Europe, could help give Netflix an underappreciated financial tailwind for its upcoming report. In the video below, tech and telecom specialist Andrew Tonner also discusses what investors need to watch for in the ongoing rivalry between and Netflix when the latter releases its earnings.