Netflix 4Q Earnings Brings High Expectations on Subscriber, Streaming News
Netflix Inc. (NASDAQ:NFLX) will report its fourth quarter earnings today after the bell and they will have their hands full trying to assure investors. The company will be on the hot seat to announce good news regarding recent subscriber discontent and overseas profits.
Analyst estimates have Netflix showing a profit of $0.54 cents per share in the fourth quarter, a decline from last year’s $0.87 cents per share. Sales are expected to come in at $857 million, representing a 44 percent increase.
Netflix will carry over some of its 2011 challenges this year and for the first quarter 2012, estimates have come in at $0.29 cents per share loss as compared to last year’s $1.11 profit. Analysts has forecast a 18 percent rise in sales to $845.6 million.
According to Bloomberg from 30 analysts’ estimates, 20 see losses through 2012 and 10 see either the year as being break even or better.
In 2011, the company saws its stock price drop 61 percent and so far this year, it has increased 34 percent thanks to stable subscriber numbers. Betting on its streaming service to make customers happy, on Jan.4, Neflix said the online service’s users spent more than 2 billion hours enjoying movies and TV shows during 2011’s final three months.
This has been seen as a sign this area is jumpstarting corporate growth. Netflix has said it has “more than 20 million streaming members globally,” according to Bloomberg. This alleviated concerns over its year-end forecasts of domestic subscribers at 20 million to 21.5 million but the company wouldn’t talk about the numbers until the quarterly report is released later today.
Netflix may discuss details on its Brazil and Latin American countries’ expansion as well as this month’s entry into the U.K. and Ireland. Should the company fall short on its overseas expansion, it could lose $130 million, according to Michael Olson, a Piper Jaffray CO. analyst.
In other losses, the company probably shed 8 million to 9 million DVD customers in the second half of 2011, including 3.6 million in the fourth quarter, said Michael Pachter, an analyst with Wedbush Securities in Los Angeles.
Loss of DVD customers
At the end of the third quarter, Netflix said it had 23.8 million total domestic customers, according to a shareholders letter, with 21.5 million streaming subscribers and 13.9 million DVD subscribers.
To offset customers who don’t want to pay the $16 for DVDs and streaming, Netflix will look to find gains in new online online customers. Soon it will lose content from Sony Pictures (NYSE:SNE) and Walt Disney Co.(NYSE:DIS) when its contract with Starz (NASDAQ:LSTZA) LLC cable network ends next month. The company has said it will add exclusive content in an effort to compete with premium channels such as Time Warner Inc.’s (NYSE:TWX) HBO.