This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Will the Curtain Rise For Netflix?

Stocks in this article: NFLX CMCSA VZ

NEW YORK ( TheStreet) - Netflix (NFLX) reports earnings after the bell, and investors are wondering whether the company can continue its fourth-quarter momentum, or if the tides have turned again on the company.

Netflix had one of the most tumultuous years a public company could have in 2011. The company's stock soared towards $300 per share as strong momentum continued to generate interest, only to plunge following several high-profile blunders.

The video company instituted a massive price hike for subscribers, prompting a headline-grabbing backlash. Then, Netflix tried to separate its DVD and streaming businesses, further alienating customers. Content deals also turned sour, forcing Netfilx to lose exclusivity on some deals that made it popular in the first place.

These errors led to TheStreet readers naming CEO Reed Hastings as the worst tech CEO of 2011.

Despite all this, 2011 ended strong, with the Los Gatos, Calif-based company beating fourth-quarter expectations and regaining some of its lost subscribers. There are doubts, however, that this momentum can continue.

Wedbush Securities analyst Michael Pachter isn't sure Netflix can continue sustained growth, citing worries over the firm's international rollout and the loss of the Liberty Starz (LTSZA) content. Pachter, however, does note in a research report that the company is likely to add subscribers this quarter and investors may react favorably. On the other hand, he adds, management will continue to focus on adding subscribers by doing anything they can, which may hurt profitability.

"We expect management to chase subscriber growth at all costs, driving marketing spending ever higher, making them unlikely to provide a specific earnings range for the full year," Pachter wrote in his research note. The analyst rates Netflix shares "underperform" with a $45 price target.

During the fourth quarter, Netflix added 610,000 total U.S. subscribers, of which 220,000 were streaming only. It also added 380,000 international subscribers.

If management were to continue chasing subscribers by any means necessary, this could hurt long-term profitability, and cause a wide range of earnings estimates, says J.P. Morgan's Doug Anmuth. Still, he believes investors will continue to focus on subscriber additions, at least for now. He expects streaming margins to be higher than the 11% guidance Netflix gave last quarter, coming in at 12.4%. Anmuth rates Netflix shares "neutral" with a $95 price target.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs