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Netflix (NFLX) is scheduled to report fourth-quarter results after the market closes on Tuesday, and the streaming giant is expected to end 2023 on solid footing.
According to the company’s own guidance, the number of new subscribers is expected to increase by an additional 9 million people in the quarter. This suggests that the net addition for all of 2023 will be around 24 million people.
Investors will also continue to appreciate the company’s revenue initiatives, including recent price hikes for certain subscription plans, as well as crackdowns on password sharing and ad-supported tiers.
The company’s announcement late Monday that Scott Stuber, head of Netflix’s film division, will step down in March may also attract investor attention.
Netflix’s revenue efforts should help improve profitability metrics such as free cash flow, operating margin, and average revenue per member (ARM).
The company previously said it expected its full-year operating profit margin to reach 20% in 2023, which is at the upper end of its previous forecast of 18% to 20%. However, ARM is likely to remain weak in the fourth quarter, before picking up in the second half of the year as the effects of advertising inventory and price increases take hold.
Here’s what Wall Street is expecting, according to Bloomberg consensus estimates.
“It is becoming increasingly clear that Netflix has won the ‘streaming wars,'” Bank of America analyst Jessica Lief Ehrlich wrote in a note ahead of Tuesday’s earnings. She said: “Over the past 18 months, changing market dynamics, investor focus on profitability and various talent strikes have led some media companies to re-evaluate their streaming aspirations. ”
These changes include reduced content spending and increased third-party licensing, recognizing that “not all media companies will be able to achieve Netflix’s global reach and scale in streaming.” She claimed there was. The analyst maintained a buy rating and raised his price target to $585 per share from $525.
Earlier this month, Netflix announced that its advertising tier now has more than 23 million monthly active users, an increase of 8 million since the November update.
Note that monthly active users, also known as MAUs, are not the same as paid subscribers. The company has not yet disclosed how many subscribers this ad tier actually has or how much revenue it has generated so far. MAU may include multiple users using the same account.
Still, Oppenheimer analyst Jason Helfstein rates the stock an outperform and has a price target of $492, although these numbers reflect the accelerating pace of ad-supported channel subscriptions. He said this is good for profitability.
“While accelerating sub-growth is positive, the sooner NFLX reaches ad scale, the sooner the ARM level will reset,” he said in a note to clients, adding, “The bull case strengthens.”
Wells Fargo analyst Steve Cahall, who has an Outperform rating and a $460 price target, estimates that 23 million ad-based MUAs will translate to approximately 13 million ad-based subscribers at the end of 2023. ing.
“We believe NFLX’s first initiative in 2024 will be an investment in long-term advertising growth,” he said.
alexandra canal I’m a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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