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Netflix, Inc. (NFLX) Q4 Earnings Preview: Login Amnesia Or More Subscribers?

 January 22, 2013 04:59 PM
 


(By Rich Bieglmeier) Netflix, Inc. (NFLX) is expected to report earnings after the market closes on Wednesday, January 23, 2013, at approximately 1:05 p.m. Pacific Time. Wall Street anticipates that NFLX will lose 60 cents for its 4th quarter, according to Yahoo and Earnings.com (same source – we know). iStock expects the online video provider will report earnings that will exceed Wall Street's consensus number. The iEstimate is -$0.26 – a 34 cent upside surprise.

Netflix provides Internet subscription services for TV shows and movies in the United States and internationally. The company offers its subscribers to watch unlimited TV shows and movies streamed over the Internet to their TVs, computers, and mobile devices.

[Related -Netflix, Inc. (NFLX) Q4 Earnings Preview: What To Watch?]

Analysts believe that growing competition, especially for Amazon's (AMZN) prime could cut into subscriber growth. The street also sees international expansion and high content costs adding to the red bottom line.

According to B. Riley & Company's Eric Wold, NFLX "is expected to add 1.4 million domestic streaming subs (to 25.2 million total), lose 700,000 disc subs (to 7.8 million) and add 900,000 international streaming subs (to 4.6 million total) and believes management will temper 2013 domestic streaming subscriber additions to 3.5 million. Wold has a sell rating on the stock with a price target of $45 a share.

Since Netflix is an internet based service, it should be an excellent case for web traffic and Google Trend to see if the web offers any hints for the Q4 eps. Based on what we found, those expecting the NASDAQ 100 member to disappoint could be disappointed.

[Related -Netflix, Inc. (NASDAQ:NFLX): Can Netflix Trump Amazon.com, Inc. With New Plans?]

Web traffic for Netflix is up 12.7% in the last three months, and 19.4% in the last 30 days, so says Alexa. Year over year, web traffic for Netflix is up, as well. Google Trends show that queries during October – December 2012 for "Netflix" are up 14% year-over-year (YoY) and 15.6% quarter-over-quarter (QoQ). Both results are potentially strong indicators of a robust holiday quarter.

Perhaps the most telling search, keyword-term for Netflix is "Netflix Login." To iStock, the term would most likely be used most by new members unfamiliar with Netflix's site/ login process. In this regard, the numbers are stellar and possible evidence of stronger subscriber growth than expected. Q4 2012 versus Q4 2011, people Googled "Netflix Login" at a 14% higher clip on average. Meanwhile, queries were up huge relative to Q3 2012, by a whopping 156%. Either large numbers of subscribers forgot how to login, switched from disc delivery to online, started free-trials, or a ton of new people forked up the $7.99 a month. We suspect the last two will be the case when earnings are announced.

Overall, expectations are low for Netflix, Inc. (NFLX) on the eve of Q4's quarterly checkup. Wall Street's consensus nosedived from -$0.12 to -$0.60 within the last seven days. If Web Traffic and Google Trends offer up any reliable clues, NFLX could hop over the bar on one-leg.
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