Netflix (NFLX) will report second quarter results in a Letter to Shareholders on its website soon after the bell. The earnings interview with management including Chief Executive Reed Hastings starts at 18:00 ET.
Netflix has guided for second quarter EPS of $0.79 (vs. $0.15 last year) with an operating margin of 12% and revenue up 41% to $3.93 billion.
Netflix also guided for 6.2 million global net subscriber additions (1.2M in the US and 5.0M for the international segment) vs. 5.2 million in the year ago quarter.
The stock is up 108% year-to-date as the company has surprised to the upside in terms of subscriber metrics in recent quarters but a number of sell side firms have been cautious regarding that metric heading into Q2 results this afternoon.
Netflix has a whopping $180 billion market value and trades at almost 90x EBITDA estimates, ~140x EPS estimates and 11x revenue estimates. The parabolic move in the stock this year has many believing its priced to perfection.
Netflix beats by $0.06, reports rev and subscribers below guidance; guides Q3 EPS, rev and subs below consensus
- Reports Q2 (Jun) earnings of $0.85 per share, $0.06 better than the Capital IQ Consensus of $0.79; revenues rose 40.3% year/year to $3.91 bln vs the $3.94 bln Capital IQ Consensus.
- "This Q2, we over-forecasted global net additions which amounted to 5.2m vs. a forecast of 6.2m and flat compared to Q2 a year ago, as acquisition growth was slightly lower than we projected. Paid net adds totaled 5.5m in Q2, compared with 4.7m last year and forecast of 6.1m. US net adds of 0.7m (vs. guidance of 1.2m) were down vs. last year's Q2-record 1.1m, but consistent with previous Q2 performance (0.5m in Q2'12, 0.6m in Q2'13, 0.6m in Q2'14, 0.9m in Q2'15, and 0.2m in Q2'16). Through the first six months of the year, our US net adds are slightly ahead of last year."
- Internationally, 4.5m net additions grew 8% year over year on broad market growth, below 5m guidance.
- Operating margin of 11.8% (vs. 12% guidance) expanded 720 bps year over year, resulting in 262% growth in operating income
- Co issues downside guidance for Q3, sees EPS of $0.68 vs. $0.71 Capital IQ Consensus; sees Q3 revs of $3.988 bln vs. $4.12 bln Capital IQ Consensus Estimate.
- For Q3, we forecast global net adds of 5.0m vs. ~5.6M estimates (compared with 5.3m in Q3'17), with 0.65m and 4.35m in the US and international segment, respectively. Paid net adds are forecast to be 5.2m, up from 5.0m in Q3'17.
- "For the full year 2018, current F/X rates have pushed our expectations on operating margin to be near the lower end of 10-11% target range. We continue to expect steady growth in operating margin in 2019 and beyond... We continue to anticipate FCF of -$3 to -$4 billion for the full year 2018, which implies that our content cash spending will be weighted to the second half of 2018"