The earnings season is accelerating and there will be two hot stocks listed next week: streaming media giant Netflix (Nasdaq: NFLX) and commercial productivity software company Atlassian (Nasdaq: TEAM). As the two companies have recently seen phenomenal growth in their basic business areas, expectations for the upcoming quarterly performance release are high.
For Netflix in the fourth quarter, investors will look for strong original content and continue to expand globally to help drive the company’s operating margins to new heights. At the same time, those who are concerned with Atlassian will want to check the surge in subscription revenue.
Hot Stocks to Watch For 2018: Netflix Corporation(Nasdaq: NFLX)
The first of these two companies to report next week is Netflix, which will announce earnings on Monday, April 16, after the close.
Although the fourth quarter results will have a lot of attention for investors, including the growth of streaming income and membership and international business profitability, one of the most insightful indicators of this period will be the company’s operating profit margin. Recently, Netflix’s operating profit margin has made significant progress. The annual operating profit margin has increased from approximately 4% in 2015 and 2016 to 7.2% in 2017. However, management expects that this indicator will continue to maintain high growth, guiding 10% of operating profit margin for the full year of 2018.
When the company reports its first quarter results, investors will see whether Netflix is moving toward this goal. Management expects operating margin to be 9.8% in the first quarter.
Analysts on average expected fourth-quarter earnings per share and earnings per share of $3.69 billion and $0.64 respectively, up from $2.64 billion and $0.40 in the same period last year.
Hot Stocks to Watch For 2018: Atlassian(Nasdaq: TEAM)
Atlassian, which ended on December 31, 2017 in the second quarter of fiscal year 2018, is very special for collaboration and productivity software vendors. Revenue and adjusted earnings per share surged by 43% and 44% respectively year-on-year.
This growth story has benefited from the surge in subscription revenue. In the second quarter, subscription revenue increased by 70% year-on-year. Due to the rapid growth in income of the department’s maintenance department during the same period, subscription growth is now the largest part of Atlassian; in the same period of last year, maintenance income exceeded subscription revenue by nearly $9 million.
Investors should find motivation in terms of subscription revenue to persist in the third quarter. As management’s guidance on overall income implies a slight slowdown, with the median guidance interval increasing by 36% from the same period of last year, and the second-quarter increase of 43%, Atlassian’s subscription revenue growth will likely slow in the third quarter. But investors should make sure that any slowdown will not be too sudden, because investors are counting on this catalyst to continue to promote the company’s strong growth in the next few years. I will seek 60% or more of my subscription revenue growth.
Analysts’ estimates of Atlassian’s third-quarter income and earnings per share were US$218 million and US$0.08, respectively, compared with US$160 million and US$0.08 in the same period last year.
Atlassian will report its third quarter results after the market closes on April 19