Stock in
Netflix
has rallied more than 50% over the past 12 months as the streaming-video company shows progress in both cracking down on password sharing and expanding consumer interest in lower-priced, ad-supported subscriptions.
The company will give investors an update on those and other topics when it reports earnings after the close of trading Tuesday.
Netflix has forecast December quarter revenue of $8.7 billion, up 10.7% from the year-ago quarter, an acceleration from 7.8% in the third quarter and the first quarter of double-digit percentage growth in two years. It expects a profit of $2.15 a share, up from just 12 cents in the year earlier period, but down from $3.73 a share in the prior quarter.
Wall Street is a touch more upbeat, The consensus view is that revenue will be $8.72 billion, with profits of $2.21 a share. Analysts expect 8.72 million in net subscriber additions, comparable to the 8.76 million recorded in the third quarter.
For the March quarter, Street estimates as tracked by FactSet call for revenue of $9.27 billion, which would mark an acceleration to 13.5% year-over-year growth, profits of $4.10 a share, and a net addition of 3.92 million subscribers. The company ended the practice of providing guidance on subscriber growth several quarters ago.
Citi analyst Jason Bazinet wrote recently that he is cautious about Netflix shares heading into the earnings report. For one thing, he said, portfolio managers expect between 10 million and 11 million net subscriber additions for the fourth quarter, which is well ahead of the analyst consensus.
He and other analysts noted that in a presentation at the CES trade show this month, Netflix said that it now has about 23 million ad-tier customers, up from 15 million as recently as early December. Wall Street will be looking for further indications of growth.
The password-sharing crackdown is another focal point, as Bazinet noted. Given Netflix’s previous forecast for substantial 2024 cash flows, the company’s capital allocation plans will be a subject of interest as well, he said.
Bazinet has a Neutral rating on the stock.
Rosenblatt Securities analyst Barton Crockett likewise rates the stock at Neutral. He cited concern about whether the boost to subscribership from the password-sharing crackdown has largely run its course.
“When that happens, what will normalized growth look like?” he wrote. “We’re concerned that if sub growth slows, while ad growth is still modest in the mix, the shares may be less happy than recent history.”
Piper Sandler analyst Matt Farrell is cautious on the stock as well. After a roughly 20% move in the stock since the company’s last earnings report, Farrell says he’s not inclined to be a buyer of the stock right now. He rates it at Neutral.
Write to Eric J. Savitz at [email protected]
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