Netflix Earnings Preview: Here Comes A Beat And Raise

Netflix reports Q1 earnings today after the bell. Join us for LIVE analysis, beginning at 4 p.m. ET, and live coverage of its earnings call, beginning at 6 p.m. ET.

The DVD rental service should easily come in at the high end of its guidance today, and should raise full-year guidance, which is a low hurdle. (Wall Street has already raised consensus above the high end of the forecast Netflix issued in January.) Our only doubt: Will the raise be big enough to impress investors — who have already sent the stock up 55% this year?

For now, let’s focus on subscriber growth, the only stat we got a mid-quarter update on.

In January, as part of Netflix’s Q4 earnings report, the company told investors it expected to finish Q1 with 10.1 million to 10.3 million subs, representing 700,000 to 900,000 net additions. By mid-February, it had already signed up 600,000 subs to hit 10 million total. That means all Netflix had to do was sign up 300,000 more to hit the high end of its Q1 guidance. Easy. Even 10.5 million is possible.

And the rest of the year? In January, Netflix expected to finish the year with 10.6 million to 11.3 million subs, representing 1.2 million to 1.9 million net additions. If Netflix hit 10.3 subs during Q1, that would mean another 650,000 net additions over three quarters to reach the 10.95 million midpoint. That’s easy, too: Last year, it signed up 1.1 million subs during that period. So even if growth fell by 40% — unlikely — it’d pass that test.

Sure, Netflix has tough comps — it got a boost last year as Blockbuster flamed out as a competitor and as it rolled out digital streaming products. But the hurdle is still too easy. So Netflix will likely raise expectations.

How much will be enough? Citi’s Mark Mahaney says in a note that a “positive” new midpoint would be more than 11.25 million year-end subs. Assuming a similar range, a good new range could be 10.9 million to 11.6 million subs.

Key Stats:

  • Q1 Revenue: $390.1 million consensus
  • Q1 EPS: $0.31 consensus
  • Q1 Subs: 10.1-10.3 million guidance, whispers above 10.4 million
  • Q2 Revenue: $407.7 million consensus
  • Q2 EPS: $0.47 consensus
  • Q2 Subs: 10.25-10.5 million midpoint “neutral” (Citi)
  • FY Revenue: $1.64 billion consensus
  • FY EPS: $1.60 consensus
  • FY Subs: 10.6-11.3 million previous guidance, 10.95-11.25 million “neutral” (Citi)

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