Earnings Preview: Netflix

Netflix (NFLX) is expected to report Q3 earnings after market close Monday, Oct. 20, with a conference call scheduled for 5:00 pm ET.

Guidance

Analysts are looking for a profit of 31c on revenue of $342.59M. The consensus range is 28c to 35c for EPS, and revenue of $336.84M to $346.3M, according to First Call. On October 6, the company said Q3 net income and EPS will be "comfortably within" guidance of $16M to $21M and 26c to 34c, respectively. Q3 revenue is also expected to be within the company's previous guidance of $343M to $348M vs. First Call consensus of $345.83M, excluding the one-time $6.5M credit given to subscribers related to an August service interruption.

Analyst Views

Netflix said it ended Q3 with 8.672M subscribers, just below the low end of its previous guidance of 8.675M to 8.875M subscribers. Additionally, the company raised its Q4 guidance to 30c to 38c from 29c to 37c vs. First Call consensus of 33c and lowered its revenue guidance to $353M to $359M from an earlier projection of $357M to $367M vs. First Call consensus of $358.82M. CFO Barry McCarthy said net subscriber growth was "unusually weak" in August and while business improved in September, performance was still below expectations "likely due" to the weak economic environment.

Throughout the quarter, Netflix has faced increased rivalry from movie-download offerings from competitors Apple (AAPL) and Amazon.com (AMZN). In an October 7 note to clients, JP Morgan analyst Barton Crockett said the lowered Q4 revenue guidance is seen as "an incremental negative for the bull-case on Netflix shares," which was that consumers were expected to watch videos even as they cut back on other discretionary purchases.