Netflix: International Markets May Save This Stock

Netflix (NFLX) provides ample opportunities for aggressive traders, and there are valid reasons to be bullish on its long-term outlook. Its last earnings release showed Netflix is on track in bolstering its global portfolio. International expansion alongside the prominence of mobile devices can increase Netflix’s available market share despite increasing competition in the US. Netflix is also interested in creating original content to further differentiate the service while lowering revenue costs substantially. Investors more concerned with the near term: speculation about exclusivity, competition and decreased earnings have lowered Netflix price per share significantly. This may continue as Netflix expects poor earnings before 2013 as it reinvests in its international markets while entering a new territory as well. A short position is appealing right now; long term investments or a short squeeze will be more appealing with a strong third quarter or early in 2013.

Netflix’s earnings release showed second quarter revenue totaled $889 million, increasing 2% sequentially and 13%, YOY. Cost of revenue and marketing expense totaled $761 million. Operating income totaled $16 million, up from a $1.9 million loss in the first quarter and down 86%, YOY. Net income totaled $6.16 million, increasing from a $4.58 million loss sequentially and down 91%, YOY. Second quarter cash flow totaled $11.1 million, increasing 420% sequentially but down 81%, YOY. Netflix finished the first half with $402 million cash and cash equivalents, an increase from $175 million, YOY.

Total costs of revenue increased 31%, YOY to account for 72% of total revenue. This was mainly due to content acquisition and licensing expenses in the US, UK and Ireland. To continue reading, click here.