Netflix, Inc. (NASDAQ:NFLX) and Groupon Inc (NASDAQ:GRPN) are among the major technology companies which will report earnings over the next several weeks. According to RBC Capital analysts, expectations for Netflix appear to be “reasonable,” although Groupon continues to be in their list of the top three Internet companies with the most risk.
Netflix reports today
After closing bell today, Netflix, Inc. (NASDAQ:NFLX) will release the results from its December quarter. RBC Capital analyst Mark S. Mahaney and his team say the company’s stock is trading almost eight turns over its historical average, which makes it one of the biggest outliers among the Internet companies they are following.
While some worry that Netflix, Inc. (NASDAQ:NFLX) won’t be able to deliver on analyst expectations, Mahaney thinks the company will. His team points to U.S. Web traffic trends from comScore, which are mixed to positive. They also did their own proprietary survey of Internet users so that they could more closely analyze the company’s consumer value proposition. As a result of their own survey, they think Netflix “offers an increasingly compelling consumer value proposition” for U.S. consumers.
The RBC Capital team expects Netflix, Inc. (NASDAQ:NFLX) to report $1.16 billion in revenue and 64 cents in GAAP earnings per share. These numbers are basically in line with consensus and consistent with guidance provided by the company, although their earnings per share estimate is toward the upper half of the company’s guidance.
A few other key factors investors should look for in Netflix, Inc. (NASDAQ:NFLX)’s earnings report this evening include subscription trends. RBC estimates that the company added 2.05 million net new U.S. streaming subscribers and lost 300,000 DVD subscribers. They’re looking for 1.4 million net new international streaming subscribers as well. They also expect to see a 23% segment contribution margin and international contribution losses of $62 million.
They continue to rate Netflix, Inc. (NASDAQ:NFLX) as Outperform with a $440 per share price target.
Groupon to report late February
Groupon Inc (NASDAQ:GRPN) is expected to report its December quarter results on Feb. 20. The RBC team lists Groupon as being among the Internet companies they follow which have the greatest risk. They cite the company’s ongoing business model transition and risks to execution, plus “broadly weak” trends in desktop traffic and high first quarter targets.
The RBC team is expecting Groupon Inc (NASDAQ:GRPN) to report revenue of $724 million, $55 million in consolidated segment operating income and 1 cent in non-GAAP earnings per share for the December quarter. Their revenue estimate is slightly above consensus, which is at $719 million and toward the upper end of the company’s guidance. Their earnings per share estimate is slightly under Wall Street’s estimate of 2 cents but within the guidance provided by the company.
The reason they have set their expectations so low is because of negative traffic trends recorded by comScore. In addition to traffic and the standard numbers, the RBC team will be focusing on the breakdown of direct versus third party revenue. They expect to see third-party revenue grow sequentially during the quarter and believe the mix between the two types of revenue will stay consistent with previous quarters. They believe direct revenue with make up 35% of Groupon Inc (NASDAQ:GRPN)’s revenue during the quarter. In addition, they’ll be looking at trends in consolidated segment operating income, which they believe will come in with margins of 7.6% during the quarter.
They continue to rate Groupon Inc (NASDAQ:GRPN) as Sector Perform with an $11 per share price target. They think there could be a turnaround in progress but that it just isn’t obvious yet.
