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Netflix, Inc. (NFLX) Earnings Should Soar, but Will They Grow Enough?

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Netflix, Inc. (NASDAQ:NFLX) will release its quarterly report next Monday, and investors are firmly back in the bullish camp in expecting amazing growth from the streaming giant. But even as the stock approaches levels not seen since before the Qwikster debacle in 2011, its lofty valuation raises the question of whether Netflix, Inc. (NASDAQ:NFLX) earnings can grow fast enough to justify the stock’s performance.

Netflix, Inc. (NASDAQ:NFLX)

Netflix, Inc. (NASDAQ:NFLX) has emerged from its strategic shift stronger than ever, with its now-separate DVD and streaming options both bringing in subscriber revenue. As the company looks to expand, though, it’s facing the same pressure to generate valuable, desirable content that the rest of the industry is experiencing. Let’s take an early look at what’s been happening with Netflix, Inc. (NASDAQ:NFLX) over the past quarter, and what we’re likely to see in its quarterly report.

Stats on Netflix

Analyst EPS Estimate $0.40
Change From Year-Ago EPS 264%
Revenue Estimate $1.07 billion
Change From Year-Ago Revenue 20.6%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

How much can Netflix earnings grow this quarter?
Analysts have gotten quite a bit more excited about Netflix, Inc. (NASDAQ:NFLX) earnings in recent months, as they’ve boosted their June-quarter estimates by $0.11 per share, and their full-year calls for next year by twice that figure. The stock has continued soaring higher, rising more than 50% since mid-April.

A big portion of Netflix’s gains came from its first-quarter earnings report, as the company continued its positive momentum with an 18% growth in revenue, and better-than-expected future guidance. With 3 million new subscribers, Netflix, Inc. (NASDAQ:NFLX) maintained its leadership of the space, even in the face of growing competition.

Netflix isn’t without challenges, though. The biggest is coming up with content that viewers will pay to watch, and the content-deal tide has gone both ways for the company lately. A June deal with Dreamworks Animation Skg Inc (NASDAQ:DWA) will give Netflix access to 300 hours of new programming, boosting its relationship, which already includes a series for kids based on the Dreamworks Animation Skg Inc (NASDAQ:DWA) movie release Turbo, earlier this week. Yet, Netflix missed out on renewing a deal with Viacom, Inc. (NASDAQ:VIAB), as Amazon.com, Inc. (NASDAQ:AMZN) scooped up exclusive rights to popular kids’ shows like Dora the Explorer.

Netflix has also ramped up its non-kids content, bringing back Arrested Development, and coming up with new series like House of Cards and Orange Is the New Black. But whether it creates its own content or buys it from elsewhere, those moves are getting quite costly, as streaming-content liabilities rose 17% last year and appear poised to accelerate in the future, as media companies get savvier about charging full value for their valuable offerings. Moreover, Amazon.com, Inc. (NASDAQ:AMZN) has a large war chest, and has proven itself willing to invest in competing content of its own in trying to build up its own service’s appeal.

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