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Oct. 15, 2019, 5:22 p.m. EDT

Netflix has history on its side heading into earnings

Streaming-video company has never posted back-to-back subscriber misses

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By Emily Bary


AFP/Getty Images
Netflix is set to report earnings Wednesday afternoon after sporting a big miss on subscriber estimates three months ago.

Heading into its make-or-break earnings report Wednesday afternoon, Netflix Inc. has history on its side.

The streaming-media giant posted a huge subscriber miss in its last earnings report, but has never fallen short on that closely watched metric in back-to-back quarters. In fact, Netflix’s /zigman2/quotes/202353025/composite NFLX -0.74%  most recent misses have been followed by strong rebounds in the following period.

After missing by 19% in the June 2018 quarter, for example, Netflix rallied to deliver 34% upside to consensus estimates in the following quarter. And while the company posted a 7% miss in March 2017, it crushed forecasts by 61% three months later. The company failed to exceed Wall Street’s projections for net additions five times from June 2014 to September 2018, with none of those coming in the same calendar year, according to MarketWatch analysis of FactSet data.

R ead: Netflix stock battered as investors await a flood of new competitors

Starting with the December 2018 quarter, Netflix began shifting Wall Street’s attention to its paid net additions metric, a count that doesn’t include free-trial subscribers. That’s where Netflix posted a massive disappointment in its most recent report, delivering only 2.7 million new subscribers globally after projecting 5 million additions.

Though the consensus forecast calls for a larger volume of net additions in Wednesday’s report, analysts have been a largely pessimistic bunch lately. Netflix’s own outlook calls for 7 million net new subscribers globally, but the FactSet consensus models just 6.7 million and is down by more than 100,000 since the end of September, suggesting a lowered bar for the company.

/zigman2/quotes/202353025/composite NFLX 292.01, -2.17, -0.74%

Management has argued that fluctuations in subscriber growth partly reflect the strength of Netflix’s new content in a given quarter, with new second-quarter programming proving underwhelming in terms of subscriber momentum, especially after a very strong start to the year. Results from the third quarter, which Netflix is about to report, likely benefitted from the release of Season 3 of “Stranger Things” in July, and the key question is whether that hit title helped drive new members to Netflix’s platform.

See also: As Netflix earnings nears, here comes an onslaught of competition — and content

Netflix’s earnings promise to be one of the high points of Wednesday’s docket as a last hurrah of sorts before Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.09%  , Walt Disney Co. /zigman2/quotes/203410047/composite DIS +1.35% and others formally begin their streaming advances. Joining Netflix in the world of Big Tech earnings Wednesday is International Business Machines Corp. /zigman2/quotes/203856914/composite IBM +0.09% , and investors will be looking to gauge the performance of IBM’s legacy business on its own, prior to factoring in contributions from its recently closed Red Hat deal.

After J.P. Morgan Chase & Co. /zigman2/quotes/205971034/composite JPM -0.58%  and Goldman Sachs /zigman2/quotes/209237603/composite GS +0.63%  kicked off a parade of bank earnings on Tuesday morning, Bank of America Corp. /zigman2/quotes/200894270/composite BAC -0.27%  will be the headliner from the financials sector on Wednesday, with PNC Financial Services Group Inc. /zigman2/quotes/203416310/composite PNC -0.10% , U.S. Bancorp /zigman2/quotes/206934678/composite USB -0.27% and Bank of New York Mellon Corp. /zigman2/quotes/200171276/composite BK -0.33%  also scheduled to report. Goldman Sachs bemoaned a weak underwriting landscape while J.P. Morgan cheered its performance Tuesday, suggesting an uneven environment for financial companies.

/zigman2/quotes/202353025/composite
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$ 292.01
-2.17 -0.74%
Volume: 5.77M
Nov. 12, 2019 4:00p
P/E Ratio
93.20
Dividend Yield
N/A
Market Cap
$128.93 billion
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$2.22M
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/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 261.96
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22.10
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1.18%
Market Cap
$1165.03 billion
Rev. per Employee
$1.98M
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/zigman2/quotes/203410047/composite
US : U.S.: NYSE
$ 138.58
+1.84 +1.35%
Volume: 17.26M
Nov. 12, 2019 4:10p
P/E Ratio
19.91
Dividend Yield
1.27%
Market Cap
$246.32 billion
Rev. per Employee
$295,532
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/zigman2/quotes/203856914/composite
US : U.S.: NYSE
$ 135.59
+0.12 +0.09%
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Nov. 12, 2019 4:10p
P/E Ratio
15.76
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4.78%
Market Cap
$119.98 billion
Rev. per Employee
$208,845
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/zigman2/quotes/205971034/composite
US : U.S.: NYSE
$ 129.16
-0.76 -0.58%
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Nov. 12, 2019 4:10p
P/E Ratio
12.75
Dividend Yield
2.79%
Market Cap
$407.49 billion
Rev. per Employee
$497,647
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/zigman2/quotes/209237603/composite
US : U.S.: NYSE
$ 220.41
+1.38 +0.63%
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9.86
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2.27%
Market Cap
$77.56 billion
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$1.34M
loading...
/zigman2/quotes/200894270/composite
US : U.S.: NYSE
$ 33.09
-0.09 -0.27%
Volume: 37.27M
Nov. 12, 2019 4:10p
P/E Ratio
12.24
Dividend Yield
2.18%
Market Cap
$298.46 billion
Rev. per Employee
$543,289
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/zigman2/quotes/203416310/composite
US : U.S.: NYSE
$ 152.30
-0.16 -0.10%
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Nov. 12, 2019 4:10p
P/E Ratio
13.63
Dividend Yield
3.02%
Market Cap
$66.80 billion
Rev. per Employee
$367,770
loading...
/zigman2/quotes/206934678/composite
US : U.S.: NYSE
$ 58.48
-0.16 -0.27%
Volume: 3.25M
Nov. 12, 2019 4:10p
P/E Ratio
13.45
Dividend Yield
2.87%
Market Cap
$91.59 billion
Rev. per Employee
$342,274
loading...
/zigman2/quotes/200171276/composite
US : U.S.: NYSE
$ 48.90
-0.16 -0.33%
Volume: 3.44M
Nov. 12, 2019 4:10p
P/E Ratio
12.69
Dividend Yield
2.54%
Market Cap
$45.24 billion
Rev. per Employee
$374,016
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Emily Bary is a MarketWatch reporter based in New York.

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