As Netflix gets set to release its third-quarter earnings numbers, Wall Street will be closely watching how many subscribers it add, both in the U.S. and in internationally.
Netflix stock fell after the second-quarter report because the company issues of forecast of lower than expected subscriber additions in the third quarter.
Most analysts seem to think Netflix will hit its targets for the three quarter, thanks in part to new seasons of Orange is the New Black and BoJack Horseman. Consensus is Netflix added 600,000 net domestic subscribers in the third quarter and 4.2 million internationally.
Related: Wall Street Looking Forward to Growth in Netflix Subs
For the fourth quarter, the Street is expecting an addition of 1.4 million domestic subscribers and 6.1 million international subscribers.
Earnings are forecast by Wall Street to be 68 cents a share, slightly below the company’s guidance that earnings will be about 70 cents a share.
For revenue, the consensus expectation for the third quarter is $4 billion, up 30% from $2.985 billion a year ago. For the fourth quarter, the Street is expecting $4.23 billion in revenue.
“We believe investors will continue to focus almost entirely on net subscriber additions when Netflix reports, including both 3Q actuals and 4Q guidance,” said Mark Kelley of Nomura. “We have increased confidence in our estimates and see international upside potential following our analysis of app download data and tracking of content popularity and distribution deals.”
Kelley noted recent announcements of new entries into the streaming arena, including Apple, Warner Media and Walmart working with MGM.
“While these services offer varying levels of direct threats to Netflix’s subscriber base, they indicate that the arms race for content is not likely to ease any time soon. Content spend continues to be one of the biggest debates around the stock, and we will be looking for any additional color on longer-term content spend plans on the call and we expect free cash flow generation will continue to drive the long-term debate,” he said..
RBC analyst Mark Mahaney said one of the things he’s focusing on as Netflix reports is international profitability. He expect contribution profit of $290 million in Q3, up from $62 million” a year ago.
Mahaney rates Netflix stock as “outperform.” We believe that Netflix has achieved a level of sustainable scale, growth, and profitability that isn’t currently reflected in its stock price,” Mahaney said.
Catalysts for further share-prices gains include continued success in international expansion, including in upcoming markets such as China and the successful rollout of new original content. Mahaney believes the original content reduces subscriber churn for Netflix.
Netflix stock got hit hard when the market plummeted last week, but largely bounced back. In early Tuesday trading, Netflix was at 336.48 per share, up 1%.
