Netflix Q3 Earnings Preview: Ad-Supported Plan, Price Hikes, And Content Slate Key Focus As Company 'Adds More And More Live Content'

Benzinga · 10/16 19:27

Streaming giant Netflix Inc (NASDAQ:NFLX) could turn attention away from subscriber figures to long-term ad-supported plan advertising growth when the company reports third-quarter financial results Thursday after market close.

Earnings Estimates: Analysts expect Netflix to post third-quarter revenue of $9.77 billion, up from $8.54 billion in last year's third quarter, according to data from Benzinga Pro.

The streaming company has beaten analyst estimates for revenue in four straight quarters and six of the last 10 quarters overall.

Analysts expect the company to report third-quarter earnings per share of $5.12, up from $3.73 in last year's third quarter. The company has beaten analyst estimates for earnings per share in two straight quarters and eight of the last 10 quarters.

Guidance from the company calls for revenue of $9.73 billion and earnings per share of $5.10, both figures below consensus estimates.

Read Also: ‘Squid Game’ Season 2 Ignites August Buzz With Netflix’s Christmas Lineup Including NFL Games

What Analysts are Saying: Analysts have been raising their price targets ahead of the third quarter earnings report, with optimism for subscriber figures and updates on price increases and the company's ad-supported plan.

Goldman Sachs analyst Eric Sheridan said Netflix's market leadership in streaming, increasing progress on the ad-supported tier, and focus on profits over growth are key factors that have helped its stock climb since its second-quarter financial results.

Sheridan added that price increases over the next year and subscriber growth remain two key topics being debated by investors regarding Netflix stock.

“We increase our net add assumptions in all markets to reflect solid third-party data trends.”

The analyst has a Neutral rating and raised the price target from $659 to $709.

Macquarie analyst Tim Nollen is looking forward to updates on price increases and the ad-supported plan.

“Netflix has continued to power ahead, in anticipation of a possible price increase in the U.S.,” Nollen said.

Nollen reiterated an Outperform rating on the stock and raised the price target from $695 to $795 recently.

“We think Netflix boasts strong pricing power,” the analyst added.

Piper Sandler analyst Matt Farrell said Netflix has multiple levers to pull in the ad-free business, particularly around pricing.

The analyst upgraded the stock from Neutral to Overweight recently and raised the price target from $650 to $800.

"As the pivot to streaming continues, we expect the company to maintain its leadership position, particularly as it adds more and more live content," Farrell said.

JPMorgan analyst Doug Anmuth has his eyes set on Netflix's fourth-quarter and the future.

"We believe the fourth-quarter content slate is strong," he said.

The analyst highlights shows like “Outer Banks,” “Lonely Planet” and “Squid Game,” while also mentioning the live sports content that includes a boxing match between Jake Paul and Mike Tyson and two National Football League games on Christmas Day.

“We expect a bigger push into live sports over time, particularly as negotiating leverage shifts in NFLX’s direction.”

The analyst recently reiterated an Overweight rating with a $750 price target.

Here are other recent analyst ratings on Netflix and their price targets:

  • Loop Capital: Maintained Buy rating, raised price target from $750 to $800
  • Benchmark: Reiterated Sell rating, $545 price target
  • Guggenheim: Maintained Buy rating, raised price target from $735 to $810
  • Oppenheimer: Maintained Outperform rating, raised price target from $725 to $775
  • Morgan Stanley: Maintained Overweight rating, raised price target from $780 to $820

Key Items to Watch: Most analysts are looking to the company's updates on price increases and the ad-supported plan.

The company previously stated that it expects third-quarter net paid subscriber additions to be lower than the previous year, which was the first full quarter to reflect the impact of its paid sharing efforts. The streaming company plans to stop sharing quarterly subscriber figures in 2025.

Thursday's paid subscriber will be among the company’s last shares in quarterly results.

Investors and analysts will likely shift attention away from this metric and more to the ad-supported plan updates.

Netflix previously said that the ad-supported plan would be a "key component" for long-term revenue and profit growth.

The company could provide updates on live sports content like the Paul vs. Tyson boxing match and the two NFL Christmas Day games. Investors and analysts would likely love to hear about sponsors for the events and how advertising demand is shaping up.

The same could be said for the upcoming highly anticipated second season of "Squid Game," with investors and analysts hoping to hear how the company could better capitalize on demand this year for its ad-supported plan.

NFLX Price Action: Netflix stock traded at $701.29 Wednesday, versus a 52-week trading range of $344.73 to $736.00. The stock is up over 50% year-to-date in 2024.

Read Next:

Photo: ssi77/Shutterstock.com