Netflix, Inc. (NASDAQ:NFLX) is the latest tech company to reveal its earnings for the third quarter of 2013. This afternoon’s earnings report showed the company earned $0.52 per share in a three month period. Revenue for the third quarter came in at $11.1 billion. On today’s market, Netflix stock trended strongly upward to finish at $355 per share.
In the run-up to the release of today’s earnings report, analysts following the firm were looking for earnings of 49 cents per share on revenue of $1.1 billion. The September quarter of 2012 saw Netflix, Inc. (NASDAQ:NFLX) earn 13 cents per share on revenue of $905 million.
Investment problems at Netflix
Netflix, Inc. (NASDAQ:NFLX) is no longer just a content streaming service, it’s a content production house. The company invests money in original content, but it does not see results for each piece of content it creates. All the company gets from its investments is an incremental increase in subscriber growth. That means it will take some time to learn the business.
Netflix, Inc. (NASDAQ:NFLX) will have to figure out where the tipping point is. At some point, the company will have so much original material it will attract the maximum amount of customers looking for new shows. It will need to keep investment at or around that level if it wants to continue growing at a reasonable rate.
Today’s earnings report shows that the company has not reached that point yet, but it is stepping around it in another kind of investment: the company’s international growth. Netflix, Inc. (NASDAQ:NFLX) needs to get that segment in the black if it wants to justify its exorbitant share price to investors.
Netflix going forward
Netflix, Inc. (NASDAQ:NFLX) is a strong company, but it has an even stronger share price. Heading into the delivery of this earnings report, the company’s stock was trading at a 2012 P/E of well above 400. A lot of growth is baked into the company’s share price and that means international and original investment are all important in the quarters, and years, ahead.
Netflix, Inc. (NASDAQ:NFLX) executives will host a conference call at 5 PM EST in order to discuss this earnings report. The company’s investors, and the analysts following it, will be eager to hear the managers’ ideas on saturation in the United States and the possibility of increasing revenue per user.