NEW YORK (TheStreet) -- Netflix (NFLX) gets the Comeback Player of the Year award. The stock performance in 2013 was remarkable. Here is a look at the year ahead and some highlights of Netflix's recent success.
2014 Netflix Outlook
As TheStreet's Jonathan Heller says, the price is high, and so are the expectations. From an earnings standpoint, Netflix is expected to soar. Analysts are predicting an EPS increase of 12 cents over the next two quarters. Additionally, analysts forecast that Netflix's annual EPS for 2014 will double over this year's projected yearly figure.
Costs will be a major issue for Netflix. In 2014, the company is poised to introduce five new original shows. As a result, the firm plans to double its investment in original content and programming for 2014. Yet, Netflix's current content costs have already dragged down its after-tax profit margin. Additionally, Netflix faces intense competition in a video-streaming industry with few barriers to entry. Competitors like Amazon and Hulu will continue to drive up content costs for Netflix due to competitive bidding.
The combination of growing costs, declining margins and intense competition may not affect Netflix's stock growth in the next two quarters. However, I believe those concerns may serve as catalysts for a selloff of Netflix's stock in the latter part of 2014. After Netflix's strong rally, says TheStreet's Jane Searle, just 15% of analysts have a buy on the stock, which is perhaps proof that after a year when the rally was fueled by multiple expansion, investors will need to cast a harsh eye over portfolios to assess whether stocks can deliver on earnings growth.
A 'Stellar' Contender in 2013