After the market closure today, Netflix, Inc. (NASDAQ:NFLX) has planned to publish its financial reports for quarter four for 2014. This report is particularly important because after quarter 3, the stock prices for Netflix, Inc. (NASDAQ:NFLX) experienced a decline of 24.8%. However, with the results to be published, Netflix, Inc. (NASDAQ:NFLX) is optimistic and it is estimated that the prices will rise due to good results.
For the last year, Netflix, Inc. (NASDAQ:NFLX) has traded with Amazon.com Inc. (NASDAQ:AMZN) at a discount worth 14%. Furthermore, its price to earnings ratio has been 67.5x. On the other hand, at this point in time, Netflix, Inc. (NASDAQ:NFLX) is trading with Amazon.com at a discount of 29%, with price to earnings ratio at 57.5x. One reason for this decline in company’s value is its weaker subscription throughout quarter 3.
The reason why subscriptions have been less is because Netflix, Inc. (NASDAQ:NFLX) has increased its subscription fee. This happened in 2011 as well when Netflix, Inc. (NASDAQ:NFLX) raised its prices, resulting in a reduction in number of subscribers. Consequently, in 2011, the share prices for the company reduced by 75%. With decrease in subscribers, the investors fear that the company might the same fate as it did in 2011.
Although it is expected that company might not meet the same end as Netflix, Inc. (NASDAQ:NFLX) is a much stronger company now, especially with huge customer base and many fans. Keeping the popular shows of Netflix, Inc. (NASDAQ:NFLX) in mind, it can be expected that consumers will be ready to get the subscription at higher prices as well.
Moreover, Netflix, Inc. (NASDAQ:NFLX) has engaged in the grandfather strategy, which means that its older consumers can still get subscriptions for the same older rate, for a time period of two years. Hence, the company won’t lose its current subscribers.
Plus Netflix, Inc. (NASDAQ:NFLX) has implemented its new pricing strategy only after testing it practically, which means that the company has accounted for many factors and it will produce positive results.
While Netflix, Inc. (NASDAQ:NFLX) has a record of always performing better than its estimates, it missed the mark for quarter three, mainly because of increased prices. Hence it is expected that the company will have accounted for the effects of pricing and as a result set easy targets. This would mean that the company would be able to meet its target again for quarter four.
As per the guidance it provided last year in October, Netflix expects 4 million net additions to its subscriber base to total the streaming subscribers to 57.06 million by the end of the fourth quarter. Of these 4 million, 2.15 million are expected to be international streaming subscribers, while the remaining 1.85 million are anticipated to be new domestic streaming subscribers.
As per the reports from Netflix, Inc. (NASDAQ:NFLX), the company expects its subscribers to increase by 4 million, with the total subscribers being 57.06 million. 2.15 of the new subscribers are expected to be international users. The revenue generated by Netflix, Inc. (NASDAQ:NFLX) is estimated to be $1.305 billion, with $0.44 as EPS. Also, its year over year improvement is expected to be at 12.6%.