Netflix: The Beat Goes On

Online video rental pioneer Netflix (NFLX) this morning reported before the bell sales for its second quarter ended June 30 of $337.6 million, and profit of 42 cents a share, on a GAAP basis. That’s in line with estimates on the top end, but slightly above profit estimates of 40 cents a share.

The shares, in early trading, are up $1.09, or 7.7%, at $28.79.

Netflix added 1.38 million subscribers in the quarter, up 35% from a year earlier, it said, for a total of 8.4 million subscribers. Compared to the previous quarter, it represents only a 2% increase.

Netflix is clearly expecting a pick-up in sequential subscriber additions. The company said it will add between 700,000 and 1.3 million more subscribers by over the next two quarters, to end the year with a total of as many as 9.7 million subs.

Apparently, the cost to add subscribers wasn’t terribly punishing this quarter, contrary to what some predicted: gross profit as a percentage of sales rose from the prior quarter’s 31.7% to 31.8%, though that is down from the year earlier’s 35%. Free cash flow nearly doubled year-over-year to $12.5 million, the company said.

For the current quarter, the company forecast revenue in a range of $343 million to $348 million, profit of 26 cents to 34 cents a share, on a GAAP basis. Analysts expect 31 cents, on average, and $347 million in sales. The company tightened its forecast for the full year, to a range of $1.36 billion to $1.38 billion in revenue and $1.19 to $1.31 per share in profit, the top end of which is just above analysts’ $1.37 billion and $1.23 per share average estimate.

Comments

[John Pseudonym:]

I use Netflix and see them as a sound company.

Looking at the chart, the price is at a critical point and a buy/sell signal is coming soon; i'm betting on a buy signal...

2008 Jul 25 01:50 PM

[beezlebub:]

nflx is back in the teens by year end as bbi ramps up it marketing...bbi has held off for a couple of quarters now....

2008 Jul 25 03:42 PM

[svosavvy:]

blockbuster who ;) I'm still lost at the short interest in this company. This is market manipulation at its crapiest, this company is an all star, but, the bear club (who beezle must belong to) is determined to torpedo it. For this company to not have a bigger pop on these earnings especially when they guided down last quarter over their transitioning into the expensive blu ray market. This is damn near criminal that a fabulous company reports great numbers in a sh*tty economy and its met with a yawn.
Great earnings, great cash flow, great cust satisfaction, really big potential in the online market which is the future like it or not, this company really works in a poor economy especially with high fuel. What more do people want, secular growth at its near finest. RIP dvd, your days are numbered in a few years along with companies that cling to it like BBI.
The roku is ok, but, watching nflx on the xbox is better. I see big things for these guys in the future. Long nflx.

2008 Jul 26 12:54 AM

[beezlebub:]

not a shorter on nflx, an avoider,,,,,my guess is that many people fear, correctly imo, that when bbi's marketing starts rolling, nflx growth declines...bbi offers more than than nflx can

i do not hope nflx goes down, i do think it does though.... and before someone spouts off about nflx downloads...bbi's digital library is bigger, it was acquired last year at a fraction of what it cost nflx to build its own....and its partnership w/ xbox can be replicated by bbi with sony or nintendo (and possibly even w/ msft, there is much speculation that nflx's deal was not exclusive) and one of them may very well be unveiled soon...also a set-top box is soon to be rolled by bbi...so these first moves (by a mere q or 2), will soon go away

in the vein that i am an nflx avoider, i am long bbi,,,,not huge but long nonetheless... we'll see where things sit by year-end into 1q09...i do like hearing the contrary view points...again, we'll see but i have not heard anything remotely convincing me that i should switch from long bbi to long nflx

2008 Jul 26 01:28 PM

[svosavvy:]

Good counterpoint,

This is the absolute first I have heard of bbi in the download business, maybe that was part of the whole game changing idea with cir city. All I see when I look at bbi is miles of brick and mortar that it will pay taxes and insurance and upkeep so little old ladies don't break their neck getting into and out of.
I have been a customer of both companies mailer services, and I personally found more titles available with nflx, not to mention nflx service is cheaper at least it was when I switched. Thats just my anecdotal take. I gotta say bbi is probably making a nice margin on their snacks at the store.
Like you say lets see in a year or two, I wouldn't count anyone out they both have very visible franchises and thats usually worth something to someone. I see a tale of two companies one looking forward and the other pulling back. Long nflx

2008 Jul 26 02:01 PM