Netflix Earnings: Three Things to Watch in the Report

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Netflix (NFLX) - Get Report needs to start making generating cash, not burning it. 

Here are three key things to watch in its earnings report Wednesday after the closing bell that will indicate whether Netflix is moving toward free cash flow positive. 

Subscribers and Pricing

We're always watching subscriber growth for Netflix, but after the company increased prices around the globe in the midst of rising competition from Disney (DIS) - Get Report , Amazon (AMZN) - Get Report and Apple (AAPL) - Get Report , one should be very vigilant of subscriber growth. Many analysts believe Netflix isn't in danger of losing subscribers, and that the growth there should be robust. Analysts are looking for 5.3 million paid net subscriber adds. 

Operating Margin

The price increases should expand Netflix's operating margin, which is currently around 10%. Management wants that to move up to 14% by year end, which analysts see as realistic. Wall Street is looking for an operating margin of 12.5% for the quarter. 

Free Cash Flow

That's the name of the game for Netflix, which has been free cash flow negative for its entire existence. The higher margin should help the company move toward free cash flow positive. Analysts are looking for cash burn of $966 million. A beat of that number could spur a rally in the stock, as it would indicate Netflix is moving in the right direction. 

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Related. Netflix Reports Second-Quarter Earnings: 5 Important Things to Watch