What to Expect: Forecasters are looking for a bottom line of 40 cents, which would trounce the year-ago bottom line of 11 cents.
Why It Matters: To give credit where it’s due, it really does look like Netflix (NFLX) has reached its critical mass — revenue growth is finally exceeding expense growth on the income statement. On the other hand, the goofy (yet still GAAP-compliant) way Netflix books its content expenses can make the income statement misleading. Last quarter, the company’s cash flow statement actually went negative, as all the recent, big content spending came home to roost.
It might have been a one-quarter fluke. Or, it might have been the beginning of a trend that could plague the company for years to come as it books the costs of its Disney (DIS) and Marvel content deals. Thing is, it might never show up on the income statement in a meaningful way. Check the cash flow statement for Netflix’s true health.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.