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Netflix (NFLX) Stock Climbs Ahead of Earnings: Should You Buy?

Netflix (NFLX) Stock Climbs Ahead of Earnings: Should You Buy?

Netflix is up about 2.2% at $146 a share on Monday as it prepares to release its first quarter results after the closing bell. Netflix remains committed to make 50% its total content original over the next few years. "It will be interesting to see how the company continues to evolve their offerings". Netflix stock was likely driven down by the fact it added 4,950 subscribers during the quarter, which was lower than FactSet's expected 5,320 new subscribers and below Netflix's guidance for 5,200 net adds. Nevertheless, Netflix hit its revenue forecast, as average revenue per user continued to rise.

Data source: Netflix Q4 2016 and Q1 2017 subscriber letters.

The company said it's seeing a "small but steady migration" to Netflix's four-stream, 4K video quality tier, but didn't say how many subs are on its highest-end plan. Yet up until now, those profits had been more than offset by losses in newer markets. The firm has a market cap of $61.76 billion, a PE ratio of 333.7042 and a beta of 1.27. That said, the days of racking up big worldwide contribution losses have clearly ended.

The stock fell 3.47 percent to $142.15, losing momentum after touching a record high in extended trade on Monday following its results, the first March-quarter report from a major USA technology company. However, this doesn't necessarily mark the beginning of a big slowdown in growth. However, investments in original/acquired content remain a drag on profitability.

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The second factor affecting Netflix's Q1 subscriber growth was a tough comparison in the global market. Subscriber growth did narrowly miss guidance.

Chief Executive Reed Hastings urged investors to look at its growth over time rather than quarter-by-quarter fluctuations.

Streaming video pioneer Netflix Inc ended the first quarter with fewer customers than Wall Street expected but issued a bullish forecast on the number of new subscribers it expects by mid-year, in a positive sign for its big global expansion.The company pushed back the next season of its defining hit, "House of Cards", and other programing to the second quarter, which should boost the number of new subscribers in that period, Netflix said. During the same quarter a year ago, the company earned $0.06 EPS.

Netflix has a strong earnings history, having beaten Wall Street estimates in 6 out of the last 8 quarters. And it forecast a sharp jump in operating margins to about 9% for Q1, and 7% for the full year as some of those content and marketing costs kicked in.

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