Netflix Q2 Revenue Up by 11%

Netflix, Inc. (NFLX), a provider of online movie rental subscription services, reported a 4% growth in its second-quarter profit, as the company added more subscribers and incurred lower subscriber acquisition costs. Further, the movie rental company raised its earnings target for the full-year, while providing financial forecasts for its third and fourth quarters.

For the current quarter, the company forecast revenue in a range of $343 million to $348 million, profit of 26 cents to 34 cents a share, on a GAAP basis. Analysts expect 31 cents, on average, and $347 million in sales. The company tightened its forecast for the full year, to a range of $1.36 billion to $1.38 billion in revenue and $1.19 to $1.31 per share in profit, the top end of which is just above analysts’ $1.37 billion and $1.23 per share average estimate.

Netflix added 1.38 million subscribers in the quarter, up 35% from a year earlier, it said, for a total of 8.4 million subscribers. Compared to the previous quarter, it represents only a 2% increase.

As Internet commerce continues to mainstream, and as video stores close, the prospects for online rental to add over 4 million net new subscribers over the next year are strong. If online rental stays on that 4 million per year track for three years, that would be more than 20 million online subscribers by mid 2010. If online rental achieves these subscriber levels, then the mass closures of the largely fixed cost video stores will help make online rental even more pervasive. Within just a few years, much of the DVD rental market will likely be online rental.

Source: Barron’s

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