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Netflix is set to post its second-quarter figures on Monday after the US markets close. The adjusted earnings per share is set to rise from $0.86 up to $1.366, driven by increased sales up from $1.27 billion to $1.336 billion. More importantly, the profitability is set to jump from $88.99 million to $116.41 million.
Netflix has managed to outperform expectations in each of the last nine quarters, and a quick glance at the current performance of US equities with extended trading hours is very much weighted towards companies exceeding expectations; it would take a brave man to bet against this being the case for Netflix too.
Netflix has shifted its focus away from its initial DVD format towards a streaming video service. Back in 2007 the company delivered its one billionth DVD, and now it is slowly winding down this arm of the company as the prevalence towards online streaming has become the norm. The initial costs in this shift in focus have been large, however on an ongoing basis there is a bigger profit margin with the reduced cost of offering content online rather than being physically delivered.
The lines between video, TV and online have become increasingly blurred and further mergers and acquisitions in this sector look inevitable.
The shares have had a bit of a wobble lately but ultimately they should hit higher highs. As long as the shares can continue to keep closing above the $444.20 level I would remain confident of this.