Shares of Netflix (NFLX – Free Report) have fallen roughly 14% over the last three months on the back of the firm’s Q2 subscriber miss. Now, with the streaming giant set to report its Q3 financial results on October 16, investors should see if it’s time to buy Netflix stock as the streaming age is just getting started.
Before we dive into what to expect from Netflix’s Q3 results, it helps to understand what else is going on at the moment.
Netflix is set to roll out some new interactive, choose-your-own-adventure style content geared toward adults, according to Bloomberg. This push includes an upcoming episode of the widely popular dystopian anthology series Black Mirror. Netflix is also reportedly negotiating rights for other live action interactive projects as it tries to stand out among its competitors and explore new avenues of entertainment.
The company has committed billions to produce a steady stream of new content, which includes TV shows and movies with some A-list Hollywood stars. Netflix announced on Monday its plan to open a new film and television production center in New Mexico to help facilitate its content efforts. The firm said it is close to buying ABQ Studios in Albuquerque, where movies such as Marvel Studios’ The Avengers were filmed.
If you look back to the second quarter, Netflix posted impressive top and bottom line growth. But the company fell short of its own subscriber projections by 1 million. NFLX still added 5.2 million new subscribers last quarter, but the big miss stood out since the streaming powerhouse had topped its subscriber projections in seven out of the previous nine quarters. This run included crushing estimates by 1 million in Q1 and by 2 million in Q4.
There have been other developments that investors should celebrate since then, and one stands out in particular. Netflix earned 112 Emmy nominations this year. The total was enough to dethrone HBO’s (T – Free Report) 17-year streak at the top. The nominations help show how far Netflix has come in a relatively short period of time. The firm earned its first Emmy nominations in 2013, when it landed a now-merger 14 in the first year it began to offer original content.
Going forward, Netflix understands that it has to make these critically acclaimed shows to compete for consumers in an ever-more crowded streaming world against Amazon (AMZN – Free Report) , Hulu, and soon enough Apple (AAPL – Free Report) and Disney (DIS – Free Report) .
HBO’s insane run of success churning out buzz-worthy hit shows is one Netflix hopes to emulate. And we can see that shares of Netflix have soared over the last three years.
Plus, shares of Netflix have surged over 83% during the last 12 months. The company’s stock price is still up over 86% since the start of 2018 and nearly 20% over the last six months. Yet, shares of NFLX have slipped roughly 14% in the past three months. It is worth noting that Netflix stock popped 2% Tuesday to climb as high as $358.67 per share through morning trading.
Q3 Outlook & Earnings Trends
Netflix expects to add 650,000 subscribers in the U.S. and 4.35 million internationally in the third quarter. This growth would bring its subscriber total to 135.14 million. Meanwhile, our Non-Financial Metrics are calling for Netflix to add 669,450 domestic subscribers and 4.40 million international members, both of which are slightly more than what Netflix projected at the start of the quarter.
Looking ahead, Netflix’s Q3 revenues are projected to jump by 33.7% to reach $3.99 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’s full-year revenues are expected to surge 35.7% to touch $15.87 billion.
At the other end of the income statement, Netflix is projected to see its adjusted quarterly earnings skyrocket 134.5% to reach $0.68 per share.The company’s adjusted full-year EPS figure is expected to expand by 113.6%. Netflix has also earned two upward earnings estimate revisions for Q3 within the last 60 days, against zero downward changes. With that said, the company’s fiscal 2018 and 2019 estimates have trended slightly in the wrong direction recently.
Netflix is currently a Zacks Rank #3 (Hold) based on its recent earnings revision trends. But NFLX stock will likely perform based on its Q3 subscriber growth, especially in the short-term.
Still, it might not be a bad idea to think about buying Netflix stock ahead of the release of its quarterly earnings results based on its strong growth projections and continued content push.
Netflix is scheduled to release its Q3 financial results on Tuesday, October 16.
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