By Lisa Richwine
LOS ANGELES (Reuters) - Netflix Inc CEO Reed Hastings boasted this month on his Facebook page that subscribers had streamed more than 1 billion hours of movies and TV shows in June, a record for the video rental service.
On Tuesday, Netflix will answer the question most on its investors' minds: How much of that increase comes from new subscribers who pay $8 a month for unlimited viewing?
Wall Street will focus on the number of domestic customers added in the second quarter to see if Netflix is growing quickly enough to pay Walt Disney Co, Warner Bros, CBS Corp, and others to stream their movies and TV shows.
Netflix added 1.7 million U.S. streaming subscribers in the first quarter and shipped online content to 23.4 million people, Hastings said in an April 23 letter to shareholders, although costs to expand in Europe saddled the company with a $4.6 million loss for the period.
Netflix said it expected to add up to 800,000 more streaming customers in the United States in the second quarter.
"That's the part investors are waiting with bated breath to see," said Barclays Capital analyst Anthony DiClemente, who estimates the company will report a gain of about 700,000 domestic streaming subscribers. He rates Netflix at "equal weight" with an $84.90 share-price target.
The stock was down 2.7 percent at $79.65 in morning trading on Monday, compared with a 52-week high of $285.50 almost a year ago.
On average, analysts expect Netflix to report earnings of 4 cents per share, according to Thomson Reuters I/B/E/S. The company estimated a range from a 10-cent loss to a 14-cent gain.
A year ago, Netflix posted earnings of $1.26 a share for the quarter, which ended just before its controversial decisions to raise prices and charge separately for its streaming and mail service prompted a wave of cancellations.
Wall Street expects revenue of $889 million for the second quarter, compared with $788.6 million a year earlier.
At Friday's close, shares of Netflix had fallen 23 percent since its last earnings report on April 23, when the company projected slower subscriber growth for the second quarter.
Still, the stock had gained more than 20 percent since Hasting's July 3 Facebook post, even though investors are nervous about pricey deals for TV shows and movies and emerging competition from companies like Amazon.com Inc and Hulu.
Investors also want to know whether Netflix still expects to add 7 million new subscribers in 2012, said JPMorgan analyst Doug Anmuth, who has a "neutral" rating on the stock.
The company's third-quarter forecast "likely needs to show a sharp increase in the trajectory of domestic streaming net adds, in order for investors to have confidence" that Netflix can achieve the 7 million target, Anmuth said in a note to clients.
Details on the international business also are key. After expanding to Latin America and Britain over the last year, Netflix has said it will hold off on entering other areas until it returns to profitability.
BMO Capital Markets analyst Edward Williams expects the company to introduce its service in another European market in the fourth quarter.
"The earlier Netflix achieves profitability in its international expansions," he said, "the earlier the company will expand further."
(Editing by Ronald Grover and Lisa Von Ahn)
A Little Dramatic
"Astonishing!" "Amazing!" "Surprisingly Violent!" (<a href="http://www.funnyjunk.com/funny_pictures/627003/Netflix+FAIL/" target="_hplink">via Funny Junk</a>)
Freaks And Geeks And Fred Rogers
Pretty much the same thing. (<a href="http://www.reddit.com/r/pics/comments/hsavs/netflix_how_do_you_come_up_with_this/" target="_hplink">via Reddit</a>)
Madea Makes An Appearance
It wasn't enough for Madea to appear in 27 of her own movies. (<a href="http://www.reddit.com/r/pics/comments/irlj0/netflix_had_a_brain_fart/" target="_hplink">via Reddit</a>)
Bill Nye The Redneck Guy
Well, Nye did <a href="http://en.wikipedia.org/wiki/Bill_Nye#The_Science_Guy" target="_hplink">start out</a> as a comedian. (<a href="http://www.reddit.com/r/pics/comments/k6nku/why_i_hate_netflix_streaming_in_canada/" target="_hplink">via Reddit</a>)
Who Was Jesus?
Mystery solved. (<a href="http://www.funnyjunk.com/funny_pictures/2228560/I+think+Netflix+is+broken/" target="_hplink">via Funny Junk</a>)
So this is what it feels like to be a member. (via The Mendicant Bug)
Where Everybody Knows Your Name
One of these things is not like the other...
The Beginning Of The Last Of The Mohicans
Only time will tell if they're right. (<a href="http://www.reddit.com/r/pics/comments/6xeo1/netflix_can_be_really_insistent_about_certain/" target="_hplink">via Reddit</a>)
Not What Anne Frank Had In Mind
Movie genres sure have changed since the days of VHS. (<a href="http://www.funnyjunk.com/funny_pictures/1056300/netflix+fail/" target="_hplink">via Funny Junk</a>)
Best BBC Costume Drama Ever
Based on the timeless 19th century novel of the same name. (<a href="http://www.reddit.com/r/pics/comments/dpdip/netflix_recommendations_fail/" target="_hplink">via Reddit</a>)
Poor guy can never live this down. (<a href="http://failblog.org/?s=netflix" target="_hplink">via Failblog</a>)
No Love For Franco
Those price hikes were really worth it. (<a href="http://www.reddit.com/r/pics/comments/hrews/really_netflix/" target="_hplink">via Funny Junk</a>)
Maybe it was a sick April's Fools joke... (<a href="http://www.funnyjunk.com/funny_pictures/2321050/Netflix+enlarge/" target="_hplink">via Funny Junk</a>)
Say No To Drugs
A gateway drug to...children's movies? (<a href="http://failblog.org/2011/03/21/epic-fail-photos-netflix-recommendation-fail/" target="_hplink">via Failblog</a>)
Eddie Murphy's Most Subversive Film Yet
Dr. Dolittle 2: A Spike Lee Joint (<a href="http://www.funnyjunk.com/funny_pictures/2444272/WTF+Netflix/" target="_hplink">via Funny Junk</a>)
Reminds us of another great <a href="http://www.theonion.com/articles/you-look-like-you-could-use-an-elizabethan-adventu,10881/" target="_hplink">Onion article</a> (<a href="http://www.funnyjunk.com/funny_pictures/1945883/Netflix+wtf/" target="_hplink">via Funny Junk</a>)
Little Arson Annie
Okay, so the movie <em>did</em> have crime... (<a href="http://www.funnyjunk.com/funny_pictures/1343392/Netflix+fail/" target="_hplink">via Funny Junk</a>)
Yet Another New Genre
Brand new Racism releases every week! (<a href="http://failblog.org/2011/01/27/epic-fail-photos-netflix-genre-fail/" target="_hplink">via Failblog</a>)
THAT'S So Raven?
Let's hope makeover madness doesn't drive her to murder (via mackman819)
Read The Caption
Subtle, but powerful (<a href="http://www.reddit.com/r/pics/comments/hb8qd/caught_this_on_netflix_for_a_brief_moment_when_i/" target="_hplink">via Reddit</a>)
Tommy Wiseau Makes Good
One of these films can take the recommendation as a compliment. (<a href="http://www.reddit.com/r/pics/comments/gr1ch/its_offensive_comparisons_like_this_netflix/" target="_hplink">via Reddit</a>)
Just Give It A Try
Not recommended for children. (<a href="http://www.funnyjunk.com/funny_pictures/1287016/Netflix+lolwut/" target="_hplink">via Funny Junk</a>)
And One Win...
(<a href="http://www.funnyjunk.com/funny_pictures/1892340/Netflix+LOL/" target="_hplink">via Funny Junk</a>)