Falling from above $107 to as low as about $82.50 in the weeks following Netflix's (NFLX -0.63%) fourth-quarter earnings report, shares have recovered significantly ahead of the company's first-quarter earnings release later this month. At the time of this writing, the stock trades at about $105. While this recovering stock price has likely been a relief to shareholders, it's raising the bar for Netflix's first-quarter results.
Image source: Netflix.
Here's what to look for when Netflix reports first-quarter results.
Expectations
For some context, here is a review of Netflix's financial results last quarter, as well as a look at what management expects from these key metrics in Q1.
|
Metric |
Q4 '14 |
Q4 '15 |
Change (YOY) |
Q1 '15 |
Q1 '16 Guidance |
Implied Change (YOY) |
|---|---|---|---|---|---|---|
|
Total streaming revenue |
$1,305 |
$1,672 |
28% |
$1,400 |
$1,813 |
30% |
|
U.S. streaming revenue |
$917 |
$1,106 |
21% |
$985 |
$1,160 |
18% |
|
International streaming revenue |
$388 |
$566 |
46% |
$415 |
$653 |
57% |
|
Operating income |
$65 |
$60 |
(8%) |
$97 |
$50 |
(48%) |
Data for table retrieved from SEC filings for quarters shown. Table source: author.
Here are a few takeaways from the chart above:
- When it comes to revenue growth, management's first-quarter guidance is particularly bullish. The company forecasts year-over-year revenue growth for its streaming business will actually accelerate from 28% in Q4 to 30% in Q1.
- Management's guidance for Q1 is particularly optimistic when it comes to its expectations for International streaming revenue. Management anticipates 57% year-over-year growth in international streaming revenue -- up significantly from the 46% growth achieved in Q4.
- Management continues to expect its heavy investments in its international markets to weigh on profitability, forecasting operating income will decline from $97 million in the year-ago quarter to $50 million in Q1.
Members
Another key area for investors to watch, of course, will be the company's reported members.
|
Metric |
Q4 '14 |
Q4 '15 |
Change (YOY) |
Q1 '15 |
Q1 '16 Guidance |
Implied Change (YOY) |
|---|---|---|---|---|---|---|
|
Total members |
57.39 |
74.76 |
30% |
62.27 |
80.86 |
30% |
|
Total U.S. members |
39.11 |
44.74 |
14% |
41.4 |
46.49 |
12% |
|
Total international members |
18.28 |
30.01 |
64% |
20.88 |
34.37 |
65% |
Data for table retrieved from SEC filings for quarters shown. Table source: author.
Just as is the case with the company's expectations for revenue growth, management expects most of its membership growth to come from its ongoing International expansion. Netflix anticipates international members to increase 65%, year over year, compared to its expectations for 12% growth in U.S. members.
Sequentially, Netflix management said it expected to add 6.1 million members during the quarter -- 1.75 million in the the U.S. and 4.35 million internationally. This is a notable figure, since it would mark record sequential net member additions for the company.
Overall, the company's international expansion will probably be a major focus in the quarterly report and in the conference call following the release; the impact of the streaming giant's enormous international expansion in January to an additional 130 countries is not fully understood.
Netflix is scheduled to report first-quarter results on Monday, April 18, after market close. Following the company's earnings release, Netflix will host a live conference call to discuss financial results at 2 p.m. PT. The results, as a well as the call, will be available on the company's Investor Relations portion of its website.
