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Market Update

After the Bell: Netflix Earnings on Tap

Can this highflier beat expectations again?

Internet subscription and DVD rental-service provider  Netflix (NFLX) is slated to declare quarterly earnings after market close Monday.

The stock, which has risen over 35% in the past three months and is currently trading above $250 a share, continues to polarize opinion, with some Wall Street analysts believing higher content acquisition costs, a ceiling for subscriber additions, and stiff competition from rivals will stifle growth going forward and weigh on the stock. 

Morningstar's Netflix analyst, Michael Corty, says the firm has built a formidable business, but he doesn't assign the company an economic moat, because he expects competition to intensify as Netflix transitions into a video streaming aggregator. At their current price, the shares are in nosebleed territory compared with Corty's  fair value estimate of $110.

Key developments in the past quarter include the firm introducing a "family plan," which allows content to be streamed over various devices in one home on a single account. In February, the company entered into a two-year agreement with  CBS (CBS) that would allow some of CBS' content to be streamed from the website. And recently,  Amazon (AMZN) started a similar unlimited video-streaming service for subscribers to its $79-a-year premium Amazon Prime service.

Analysts on the conference call will listen for management comments on subscriber additions and how price increases on shipments of DVDs impacted results. Wall Street's consensus is for Netflix to post earnings-per-share of $1.07, compared with $0.87 in the previous quarter and $0.59 in the year-ago quarter. Netflix has beaten Street estimates thrice in the past three quarters.

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