Tech is up to bat in Q4 earnings season, and the streaming king is releasing its results after the bell Tuesday, January 21st. Despite Netflix’s NFLX massive decade of returns, it appears that the shares have leveled out. Over the last 52-weeks, this stock has traded sideways as new competition in the space, and a decelerating customer base has begun to instill concern in investors.

Tomorrow’s earnings are likely to move this stock with the last 8 quarter releases having an average price action of 6.8% (5 up, 4 down). For this December quarter, Zacks Consensus estimates show an EPS of $0.51 on sales of $5.44 billion, which would represent year-over-year growth of 70% and 30%, respectively.

Investors’ primary focus will be on the number of added subscribers both domestically and internationally when dissecting the earnings report tomorrow. These figures tend to move the stock more directly than EPS and revenue estimates.

Additional domestic subscriptions are expected to slow down significantly, with analysts estimating only 589,000 new subscribers. A plateau has already begun with domestic subscription decline in June quarter results and a big subscriber miss in Q3. North American subscriber growth is no longer the investors’ biggest concern.

International subscriptions are now the primary driver of the business’s future growth. Subscriber expansion is estimated to be substantial, with 7.04 million new subscribers expected abroad. Their international business is a segment that they cannot afford to curtail, considering that this is anticipated to be the most significant top-line driver moving forward. If this international estimate is missed, expect to see an NFLX share price decline.

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Competition in Streaming

Competition in the subscription video streaming space has picked up with new top-tier tech players exploring the segment. Apple AAPL and Disney DIS both released streaming services of their own this past fall. Disney+ was able to gain 10 million subscribers its first day of availability and is expected to have over 100 million by 2025.

Comcast CMCSA and AT&T T are releasing streaming platforms of their own this spring, which will further shake up the streaming industry.

More and more Americans are cutting the cable cord and turning to streaming services. There is room in the sea of streaming services, but these new competitors are likely going to slow Netflix’s growth.

It is now up to Netflix to make sure its service is a necessity in households’ library of platforms. Its latest critically acclaimed hit, The Irishman, which is now up for 10 Oscar nomination including best picture, illustrates that Netflix means business in war between streaming services.

Take Away

When analyzing the Netflix earnings glance at EPS and revenue figures but keep your focus on subscriptions added in Q4 because that is going to be the real NFLX mover. Remember, if you miss the initial move, it doesn’t mean you have completely missed out on a buying/selling opportunity. NFLX tends to keep its momentum after positive/negative earnings.

Look for changes in management guidance as well as management sentiment and tone for clues on how they see business moving forward.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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