Get ready for a major shift in focus when Netflix unveils its third-quarter financial results on Thursday after market close. While subscriber figures have been a key metric for the streaming giant, analysts and investors are turning their attention to Netflix’s ad-supported plan and its potential for long-term revenue growth.
Earnings Expectations:
Analysts are anticipating Netflix to report third-quarter revenue of $9.77 billion, a significant increase from $8.54 billion in the same period last year. This follows four consecutive quarters of exceeding revenue expectations and six out of the last ten. Earnings per share are projected at $5.12, up from $3.73 in the third quarter of 2023, marking a streak of exceeding earnings estimates for two straight quarters and eight out of the last ten.
Analyst Optimism:
Despite the company’s guidance for revenue of $9.73 billion and earnings per share of $5.10 (both slightly below consensus estimates), analysts are optimistic about Netflix’s future. Several factors contribute to this positive sentiment, including the company’s market leadership in streaming, increasing progress on its ad-supported tier, and a focus on profitability over subscriber growth.
Goldman Sachs analyst Eric Sheridan highlighted these factors as drivers of the stock’s climb since the second-quarter results. He also mentioned price increases and subscriber growth as key topics of debate among investors. Macquarie analyst Tim Nollen echoed this sentiment, emphasizing Netflix’s pricing power and anticipating updates on price increases and the ad-supported plan. Piper Sandler analyst Matt Farrell believes Netflix has multiple levers to pull in the ad-free business, particularly in pricing.
Live Content and “Squid Game” Hype:
JPMorgan analyst Doug Anmuth focused on Netflix’s fourth-quarter content slate, highlighting shows like “Outer Banks,” “Lonely Planet,” and the highly anticipated second season of “Squid Game.” He also emphasized the importance of live sports content, citing the upcoming Jake Paul vs. Mike Tyson boxing match and two National Football League games on Christmas Day. Anmuth believes Netflix will increase its focus on live sports, leveraging its negotiating power to secure favorable deals.
The End of Quarterly Subscriber Reports:
In a significant development, Netflix announced its plan to stop sharing quarterly subscriber figures in 2025. This shift signals a change in the company’s priorities, with the ad-supported plan taking center stage. Investors will likely scrutinize updates on the ad-supported plan’s performance and its impact on long-term revenue and profit growth.
Looking Ahead:
While Netflix’s third-quarter earnings will provide valuable insights into the company’s current performance, the focus will undoubtedly shift to the future. Analysts and investors are eager to hear how Netflix intends to capitalize on the growing demand for its ad-supported plan and the success of its upcoming content slate, which includes the highly anticipated second season of “Squid Game.”
Netflix Stock Performance:
Netflix’s stock has performed well in 2024, trading at $701.29 on Wednesday. The stock has seen a significant year-to-date increase of over 50% and is currently within its 52-week trading range of $344.73 to $736.00.