Netflix Gives Back Some Gains, Despite Solid Numbers (NFLX)

Netflix, Inc. (NASDAQ: NFLX) has released its earnings and issued guidance and some core metrics to how how its business is doing.  The company posted $0.24 per diluted share on a GAAP basis on revenues of $302.4 million.  The company ended the quarter with a total base of 7,479,000 total subscribers.  The company had previously offered guidance of GAAP EPS $0.09 to $0.16 on Revenues of $297 to $302 million, and it had previously forecast a quarter end of 7.3 to 7.5 million subscribers.

Reed Hastings, Netflix co-founder & CEO noted, "We achieved strong results in 2007… despite facing tough competition for much of the year and investing strategically in our online video initiatives… The emergence of a bundled service that enables our subscribers to receive DVDs through the mail fast and movies and TV episodes over the Internet instantly, positions us to achieve solid growth in 2008 and over the long term."

The metrics are continuing to improve from prior quarters.  Subscriber acquisition costs again came down to $34.60 for the fourth quarter and churn was 4.1%.

• First quarter guidance is GAAP EPS of $0.13 to $0.21 on revenues of $323 to $328 million with a total of 7.85 to 8.05 million subscribers. First Call has estimates at $0.15 EPS and $320.1 million in revenues.
• Fiscal guidance is GAAP EPS of $1.12 to $1.24 on revenues of $1.3 to $1.35 Billion revenues with a total of 8.4 to 8.9 million subscribers. First Call has estimates at $0.91 EPS on revenues of $1.31 Billion.

It looks like the bears might be harping on a slowing of its growth rates.  While that is bound to ultimately happen as a business matures, these numbers actually look pretty good considering the intense competitive environment that Wall Street has been concerned about during the onslaught of an economic slowdown.  Shares closed up over 6% at $23.76 in a strong market at the end of thetrading day, but shares in after-hours are down about 2.3% at $23.20.  Over the last 52-weeks, shares have traded as low as  $15.62  and as high as $29.14.

Jon C. Ogg
January 23, 2008