What Investors Need To Look For During Netflix’s Q3 Earnings Report

Investors will have their eyes glued to Netflix’s Q3 earnings report today, with the streaming service expected to unveil big numbers.

Oct. 20, 2020

As the first of the major tech stocks to report its third-quarter earnings, Netflix (NASDAQ: NFLX) is sure to be a market mover whether the finances are good, bad, or downright ugly. Reporting after the bell today, here is what Netflix investors should look for, and what numbers you can expect to see.

Netflix’s Q3 guidance

Back in July Netflix provided Q3 guidance that left investors and analysts alike wanting. 

It offered revenue guidance of $6.33 billion and earnings per share (EPS) of $2.09, below analyst estimates of $6.4 billion, while the company estimated 2.5 million net subscriber additions in Q3 versus the 5.4 million predicted by Wall Street. These expectations were far below the 15.8 million net additions in the first quarter of 2020 and the 10 million added in Q2. This was an unusually pessimistic outlook from Netflix, especially since lockdowns continued worldwide as COVID-19 cases rose. 

Having hit a record high of $575.37 per share in July, Netflix has since contracted to $530.72 per share, as of market close, October 19. 

What’s the view from the Street

Wall Street analysts are expecting Netflix to report earnings of $2.12 per share on revenue of $6.38 billion. Meanwhile, the general consensus for subscribers gained is between 3 million and 6 million, which could see Netflix’s overall numbers fall just short of 200 million.

What’s the view from MyWallSt?

Much like my own anticipation of Stranger Things season 4, I’m cautiously optimistic, but expect to get a little uncomfortable. 

With roughly 190 million subscribers as of the end of Q2, Netflix still far outstrips competitors such as Disney and Hulu. Meanwhile, with the winter months coming and coronavirus cases hitting record-highs worldwide, Netflix’s own conservative outlook may be just that. Do not be surprised if Netflix posts earnings per share of closer to $2.19, which is Wall Street’s ‘whisper number’ — the overly optimistic expectation — and net subscriber growth of around 5 million. 

But with such conservative guidance last quarter, perhaps Reed Hastings and Co. knew something we didn’t?

Key Netflix metrics investors should look for

  • Earnings per share
  • Revenue
  • Net subscriber additions
  • Updates to its content lineup
  • Q4 forecast 

For a complete rundown on how to get through earnings season, check out our Earnings Season Cheat Sheet.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.