NFLX Stock Rallies 18 Percent To New Highs On 50 Percent Earnings Beat

Shares of Netflix, Inc. (NASDAQ: NFLX) were trading sharply higher, up 18.06 percent, or $17.69, to $115.85, on almost triple-average volume at 3:00 p.m. After the market close yesterday, the streaming media provider reported earnings that beat Wall Street analysts’ consensus estimates by 50 percent. NFLX shares immediately rallied on the news in the aftermarket. The 34 analysts that follow the firm had published research, with average earnings per share expectations for $0.04 per share for the second quarter. Netflix management delivered $0.06: a large beat.

Netflix is expected to sell $6.78 billion in streaming media this year, and $8.46 billion in 2016. That represents year-over-year growth of 23.20 percent and 24.80 percent, respectively. Earnings, however, are a different story for Netflix. The same Wall Street analysts also expect the firm’s EPS numbers to decrease 64.30 percent and 70.00 percent over the current and coming quarters. Netflix EPS is expected to decrease 64.20 percent in 2015, from 2014 levels. EPS figures are expected to grow by 131.60 percent in 2016, and grow an average 23.27 percent annually over the next five years. In part, the EPS growth reductions forecast over the current and coming quarters are the result of tough comparisons from 2014 growth numbers. However, growing earnings are always preferable to earnings decreases.

Analysts Decrease NFLX EPS Estimates For 2015 And 2016

Wall Street analysts have decreased their EPS estimates for NFLX shares over the past 90 days from $0.26 to $0.19 per share for fiscal 2015, and from $0.52 to $0.44 per share for fiscal 2016. Netflix has a total market capitalization of $48.99 billion. There are 424.36 million NFLX shares outstanding.

While the earnings beat is impressive, trading in NFLX shares has caught many market observers off-guard, including Chief Executive Officer Reed Hastings. “When the stock was half this price I described it as euphoric. So it’s a mystery to me,” the CEO was quoted as saying about NFLX shares.

NFLX Shares Up 138 Percent In 2015

NFLX shares are up 138 percent in 2015, and have increased in value by 653 percent over the past five years. NFLX shares began trading on a post-split basis at the close of trading on July 14, 2015. The shares split seven-for-one.

On a pre-split basis, NFLX shares traded between $350 and $525 for much of 2014 and early 2015. Just days before the release of first quarter NFLX earnings results, NFLX shares broke-out of the range and have continued to reach new high ground on an almost weekly basis. On a pre-split basis, NFLX shares would be valued at about $805 with today’s trading. That represents a gain of nearly 55 percent from the top of the last defined trading range. NFLX shares have a price to earnings ratio of 211.28, based on trailing twelve month data. NFLX shares pay no regular dividend.

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