Expecting Netflix to Top Consensus Estimates

Netflix (NFLX) is scheduled to report Q208 results before the market opens on July 25. Based on our analysis, we at eChristianInvesting are expecting NFLX to report better than expected results that beat Wall Street’s consensus expectations.

We are forecasting revenues of $340.8M versus analyst consensus of $337.6M. This would represent a 12% increase in revenues from last year’s $303.7M in the same period.

While many companies are suffering from the effects of a slowing economy, we believe that Netflix has benefited from it. With more people opting to stay close to home this year, they have found the Netflix service to be a surprisingly low-cost alternative to visiting the theaters or even taking mini-vacations.  Our sources point to strong y/y subscriber growth leading to higher top-line revenues. 

Share Performance

To date, Netflix’s shares have gained 2%. That’s very good considering the NASDAQ has dropped over 13%. Investors are clearly showing their confidence in Netflix’s business model and their ability to continue to attract customers even during challenging economic conditions.

Valuation

Shares are now trading at only 18x consensus 2009 EPS estimates. This is inline with the relative valuations of their peer group. However, we believe that Netflix’s superior business model as well as the upside opportunity in their upcoming earnings release should allow NFLX shares to trade higher in the coming days.

Disclosure: At the time this article was published, the author did not have a financial position in any of the stocks mentioned in this article.