Earnings Preview : Netflix, Inc. (NASDAQ:NFLX) First Quarter 2010
Friday, April 16, 2022 10:31 AM

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Netflix, Inc. (NASDAQ:NFLX) is scheduled to report its Q1 2010 results after the marker closes on April 21, 2010. Netflix is expected to beat consensus expectations (above mid-point of guidance for subscriber additions and EPS). Subscriber growth this quarter will be mainly attributable to rollout of Netflix on the Nintendo Wii. Netflix "Watch Instantly" was enabled on the Nintendo Wii, the most popular video game console in the US (with 28.1MM units sold, 47% share of next-generation console installed base through 2/10, per the NPD Group), at the end of CQ2. Netflix is right in the centre of a successful transition from a physical distribution model to a hybrid (physical + digital) distribution model, and its digital efforts to-date are the most sophisticated and well-funded within the competitive landscape. Another advantage for Netflix is the launch of the iPad, which could accelerate the company's international expansion.

Netflix Inc. is the largest online movie rental subscription service in the United States providing subscribers access to a comprehensive library of more than 18,000 movie, television and other filmed entertainment titles. The standard subscription plan allows subscribers to have three titles out at the same time with no due dates, late fees or shipping charges for a monthly fee.

As for Q4 2009, revenue came in at $445 million and ARPU at $ 13.04, down 4% YoY. Netflix ended Q4 of 2009 with approximately 12,268,000 total subscribers, representing 31 % YoY growth from 9,390,000 total subscribers at the end of Q4 of 2008 and 10 % sequential growth from 11,109,000 subscribers at the end of Q3 of 2009 Gross margin for the Q4 of 2009 was 38.0 % compared to 35.2% for Q4 of 2008 and 34.9% for Q3 of 2009. GAAP net income for Q4 of 2009 was $30.9 million, or $0.56 per diluted share compared to GAAP net income of $22.7 million, or $0.38 per diluted share, for Q4 of 2008 and GAAP net income of $30.1 million, or $0.52 per diluted share, for Q3 of 2009. Churn for Q4 of 2009 was 3.9 % compared to 4.2 % for Q4 of 2008 and 4.4 % for Q3 of 2009. Free cash flow for Q4 of 2009 was $30.2 million compared to $51.0 million in Q4 of 2008 and $25.5 million for Q3 of 2009. Cash provided by operating activities for Q4 of 2009 was $105.8 million compared to $92.1 million for Q4 of 2008 and $78.3 million for Q3 of 2009.

Analysts' estimates for Q1 2010 range from a low of $0.44 to a high of $0.60, compared to a consensus estimate of $0.54, with number of estimates being 31 and the co-efficient variance 7.00. The management expects Q1 2010 ending subscribers to be in the range of 13.5 million to 13.8 million, revenue between $490 million to $496 million, GAAP net income of $26 million to $32 million and GAAP EPS of $0.47 to $0.58 per diluted share. Netflix definitely looks solid as store-based model under stress and consumers continue to adopt digital streaming (48% of NFLX subs streamed video in CQ4) and catalog of quality movies would cost ~$800MM to replicate. Netflix's "All-you-can-eat" subscription plans and no late fees that create strong value proposition for DVD rentals should drive earnings and a declining subscriber acquisition cost (-5% Y/Y in CQ4:09) adds to the benefits.

The stock closed at $87.57 on April 14, 2022 and most analysts' recommend a strong hold on this stock with an average price target of $82.
 

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