Update 16:00 EST: The market is closed. Netflix shares fell by 2.5 percent on today’s market as traders exercised their nerves about the run up ahead of earnings.
Update 16:05 EST: Netflix IR site appears to be down on heavy volume. Not a good sign for a firm that relies on network infrastructure.
Update 16:09 EST: Q2 user numbers hit more than 65 million. The firm added 3.3 million user during the quarter.
Update 16:11 EST: Q2 EPS came in at 6 cents per share. That 42 cents per share compared to the analyst numbers adjusted for yesterday’s 7-to-1 stock split.
Update 16:12 EST: Shares are up by more than 10 percent after the reveal, a new all time high for Netflix.
Update 16:19 EST: Netflix guides for 7 cents EPS for the third quarter.
Netflix Inc. will show off earnings for the three months through June 2015 this afternoon once the market closes for the full day on Wall Street. The firm’s shares have soared heading into earnings as investors are buoyed by global expansion and the expectation of huge growth.
The numbers will arrive some time after 4:30 EST, and we’ll be reporting them here just as soon as they appear to the public.
Netflix earnings preview
Netflix has been one of the strongest stories on Wall Street this year, and the firm is thought to have its best days ahead of it by many on Wall Street. For the earnings set to hit today, Wall Street is, by consensus, looking for earnings per share of 31 cents. Revenue will come in at $1.64bn says the same mean outlook.
Netflix is thought to be doing much worse than last year in terms of earnings as it keeps spending as much money as it can in order to get into new markets. In the second quarter of 2014 the firm earned $1.16 per share on sales of $1.4bn. It’s sales growth, and its base user growth, that traders really want to see from Netflix.
Netflix user growth is the real number
Netflix has shown it can earn money in the past, so the firm doesn’t find itself in the kind of place Twitter is in right now. If user growth slows, the firm will still be a huge cash machine, but the cash flow it has right now does not support its share price.
Netflix shares hit over $700 for the first time earlier this month before promptly splitting at 7-to-one. That means that each Netflix older now has seven shares in place of each one they held before. Wall Street’s mean price target on shares in the firm now sits at $100, while the high sits at $135.
User growth is what Netflix needs in order to get there, and Wall Street is pricing a huge amount of that in. Growth is expected to slow in the US as more and more of those with broadband signing on leaving little enough room for the firm to grow.
According to Morgan Stanley, which put a $780 price target on the firm on Tuesday July 15, Netflix will face global problems related to “inconsistent and generally low broadband speeds, usage caps, and lower consumer spending,” but growth will still be strong.
Benjamin Swinburne, who wrote the report for Morgan Stanley, says the total market for the firm’s services will hit 480m by 2025. That’s a lot of market for the firm to grow into, and Wall Street values the firm at more than $40bn because it thinks it can get there.