Netflix shares trading at new highs ahead of earnings report

Netflix shares are rising sharply ahead of the company’s earnings report today. They are up nearly 5 percent to about $348, at a record trading high, as of this post. Here are a couple of things to watch about the Los Gatos video-entertainment provider.

• An analyst report shows Netflix is poised to surpass HBO in paid U.S. subscribers. Reuters cites a Needham & Co. report that shows 30 million U.S. subscribers for Netflix vs. 28.7 million for HBO as of the end of September.

The projections come after a recent report in the Wall Street Journal that Netflix may be joining HBO and other premium networks on more potential subscribers’ radar. The company is supposedly talking with cable providers in an effort to be included as an app on cable set-top boxes. In other words, if you thought Netflix was everywhere before, making its way into set-top boxes would pretty much complete its mission to conquer the world (or at least the United States). But as Mike Murphy wrote for SiliconBeat, there are some hurdles that need to be overcome before that happens.

• Meanwhile, on to the accounting channel: Quartz points out that what Netflix has wrought — watching TV series in one big gulp — manifested in its investment in original programming, is important because it could result in a hit to the company’s shares.

The issue is how Netflix decides to account for its spending on shows such as the “House of Cards” ($100 million for two seasons). Because binge viewing is thought of as something that’s started and finished pretty quickly after a series becomes available, the company has apparently been considering reporting expenses more quickly up front as opposed to spreading them out over a few years. This could mean a big short-term hit to Netflix’s earnings.

By the way, Wall Street is optimistic about Netflix: One poll expects profit of 49 cents a share compared with 13 cents a share in the same period last year, on revenue of $1.1 billion vs. $905 million in the third quarter of last year.

 

Photo of Netflix headquarters from Getty Images

 

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