Earnings Preview: Netflix Faces High Expectations for Fourth-Quarter Results

January 16, 2019

By Chloe Aiello

Netflix faces high expectations as it prepares to report earnings on Thursday after the market closes.

Based on the viral strength of "Bird Box" plus Tuesday's price hike announcement that sent shares flying, investors are anticipating a strong quarter from the streaming giant.

"Announcing that they're raising prices is a pretty strong indication they are going to have a very good quarter in Q4. I don't think they would make that announcement and then announce bad earnings," Mark Douglas, CEO of digital display advertising platform Steelhouse told Cheddar on Wednesday.

On Tuesday, Netflix raised its subscription prices for customers in the U.S. and some parts of Latin America by $1 to $2, depending on the package. The price hikes, which will help fund Netflix's investment in original content, apply to new customers immediately and will roll out to existing customers within the next few months.

"We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members," a Netflix spokesperson said in a statement.

Netflix stock popped after the news broke. The company has been enjoying a splashy month after its original "Bird Box" film was viewed by 45 million accounts and dominated social media, inspiring countless viral memes.

"They ended the quarter just incredibly with 'Bird Box' with all the social media that came around that. And I think it's just very good timing and everyone should expect good results," Douglas said.

But Netflix's success hasn't gone unnoticed by its media peers and the company is facing some serious competition from the likes of AT&T ($T), Disney ($DIS), and Comcast ($CMCSA), all of which are looking to emulate the streaming giant's success. Douglas said Disney likely poses the biggest threat to Netflix, but it won't necessarily have a material impact in the short-term.

"Disney is clearly the strongest company that is going to challenge them. But in my mind until someone cancels a subscription to go to Disney, they're not truly competing yet," Douglas said.

Netflix's ($NFLX) stock is up 31 percent in the first few weeks of 2019, and 59 percent year-over-year. It's by far the top performer of the FAANG stocks ー or Facebook ($FB), Amazon ($AMZN), Apple ($AAPL), Netflix, and Google ($GOOGL) ー the second best performer, Amazon, is up about 12 percent year-to-date and 30 percent since last year.

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