Earnings Preview: Can Netflix Keep Growing Memberships?

Netflix (NASDAQ: NFLX) reports earnings on Tuesday in what some consider to be one of its most pivotal quarters in several years. The market is awaiting the November launch of Disney's (NYSE: DIS) Disney+ streaming service and it marks a significant new challenge to Netflix's dominance among streaming services.

Ahead of that added competition coming online, Netflix needs this week's earnings release to go well. If membership growth for the quarter does not meet or exceed market expectations, the downside potential for the stock will increase dramatically.

Proof of increased demand for the streaming service will be a focus in the upcoming report. While the company is profitable, its free cash flow has been increasingly negative as Netflix continues to run up big bills creating its original content and paying for expansion efforts. Free cash flow for the second quarter was negative $594 million. Full-year guidance from Netflix projects free cash flow at negative $3.5 billion. Because of this, demonstrable subscription and revenue growth are all the more important for the company to scale itself into a profitable enterprise.

Source Fool.com