Will Netflix Results Be Binge-Worthy?

Fresh off its 7-for-1 stock split, Netflix (NFLX) will report its June-quarter results after the closing bell today. Wall Street is expecting a whopping $0.04 to $0.05 per share in earnings on revenue of $1.65 billion. While the bottom-line comparisons are down sharply, year over year, what's driving the shares, which are up almost 60% over the last 12 months, is the combination of subscriber and revenue growth. Make sure, as you look at figures for Netflix today, that both current and past results have been adjusted for the stock split. As I write this, for example, Yahoo! Finance is showing the June 2015 expectation to be $0.04 per share, but the year-ago quarter is still pre-split at $1.15 per share. Adjusting full-year 2015 and 2016 bottom-line expectations puts them at around $0.50 per share and $0.70 per share, respectively. If you're wary of highly valued stocks, at least on a price-to-earnings basis, this stock may not be for you. Netflix is trading at around 200x post-split EPS expectations for 2015 and 143x 2016 post-split consensus. If, however, you're one of those investors that can see the forest for the trees and has no problem putting your capital behind a story stock, Netflix shares could be your bailiwick. I like Netflix for many reasons. I use the service all the time from a variety of devices. The company also serves up its own binge-worthy content. Recent data from RetailNext as well as the more-than-disappointing June Retail Sales report indicate the consumer is not looking to spend. And airline data from JetBlue (JBLU), Virgin America (VA), Spirit Airlines (SAVE) and even American Airlines (AAL) confirm consumer 'tightfistedness,' as individuals are not flying as much as a year ago. To me, that bodes well for Netflix usage as does those looking to cut the chord given the cost creep associated with cable bills from Comcast (CMCSA), Time Warner Cable (TWC) and others. Marry that with the shift in the use of devices and Netflix is a no brainer. In fact, instead of hearing friends say they will wait to rent a movie they are now saying they will wait for it on Netflix. One of the keys to story stocks is growth, and for Netflix that means growing its subscriber base. Sure, the company will get more domestic subscribers, but the real bang for its buck will come from international expansion. Back in January, Netflix was in 50 countries and it shared plans to be in 200 by the end of 2016. That could drive explosive growth in the subscriber base and provide strong cash flow, but there are also likely to be hurdles along the way. Launching in several new countries at one time offers a number of challenges, and the greater the international exposure, the greater the toll a stronger dollar can take on a company's financial performance. We've heard quite a bit about that in recent weeks and we'll hear even more in the coming ones as we get hip deep into June-quarter earnings. Despite all the positives, one of the issues I have with Netflix is its less-than-perfect track record when it comes to meeting or beating quarterly Wall Street expectations. In the last year, the company has both crushed and wildly missed Wall Street expectations. The March 2015 quarter was a wide miss and factors like the international launches and the strong dollar remain, which helps explain why earnings expectations for the June quarter have ratcheted down over the last few months. Some may be concerned with competing offerings from HBO, Sony (SNE) and Hulu, but Netflix offers a far wider array of content and also has its own proprietary content. If the company misses expectations tonight, depending on the reasons, it could serve up an opportunity to get in the shares for the long term. Make no mistake, it will be a bumpy ride, as additional international markets are launched en masse to hit that target of 200 by end of 2016. The long-term payoff, however, is the continued shift toward a higher margin streaming customer base that is growing. When viewed that way, there is more upside to be had long term with Netflix shares.

Will Netflix Results Be Binge-Worthy?

A miss tonight could provide a good opportunity to put the shares at the top of your queue.

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