Can Netflix Maintain Its Growth and Justify Its Price?

Netflix has had a dizzying run in the past year - its stock is up over 270 percent. The big question on investors minds: will it maintain its growth and justify its valuation? Netflix reports fourth quarter earnings after the bell and will give its guidance for EPS and revenue for Q1 and the full year 2011. Analysts expect Netflix revenue to grow 34 percent over year-ago numbers to $597 million, with EPS projected at 71 cents, up 27 percent.


Some other key stats will be in the spotlight.

The company said it expects to end Q4 with between 19 million and 19.7 million subscribers (it ended Q3 with 16.93 million subscribers). But the company has a record of surprising to the upside on subscribers, so we'll see if the company comes in at the top end of its projected range or higher. Now that the company has a streaming-only option, the question is how many customers have switched to the streaming-only option, and how many new subscribers has it attracted?

The company isn't hosting a traditional post-earnings conference call, instead just doing a Q&A, and all questions must be submitted via e-mail ahead of time. We can expect plenty of attention about international growth. Investors would be eager for more granular reports on how Netflix's expansion in Canada is going - it's facing challenges because bandwidth restrictions are greater there than other countries.

The other looming question for Netflix is its relationship with Hollywood. As it becomes more like a premium cable channel, can it continue securing more content at reasonable prices? In the past two quarters it's made a number of meaningful content deals - including one with Disney/ABC television and another with Relativity Media, to stream first run movies, just like Showtime or HBO.

But Netflix and Time Warner are still at a standoff over HBO content. Netflix's chief content officer recently said the company will make a big push to buy HBO's pay TV output deal with Warner Brothers before it expires in 2014. It was just a few weeks ago Time Warner CEO Jeff Bewkes told me that he's doesn't think HBO's threatened by Netflix - it's not an 800 pound gorilla but a 200 pound chimp. There's no question that the premium cable model and Netflix's streaming only option are going to be facing even more comparison in the coming year.

Questions? Comments?