77
Source: Visible Alpha
Key Takeaways
- Netflix is expected to record the sharpest year-over-year revenue growth in two years when it reports fourth-quarter earnings after closing on Jan. 23.
- Net income and EPS are forecast to also rise sharply compared with the prior-year quarter.
- Netflix has seen continued success with its low-priced, ad-supported plan and its global crackdown on password sharing.
Netflix Inc. ( NFLX ) is predicted to post its largest year-over-year (YOY) revenue growth in two years when the streaming giant reports earnings results for the fourth quarter of 2023, amid a ramp-up in interest in the company’s lower-priced ad-supported plan and a continued crackdown on password sharing.
Analysts expect Netflix to report net income of $983.9 million, up substantially from just over $55 million a year prior, and earnings per share of $2.25 compared with $0.12 for the final quarter of 2022. Revenue is expected to reach a record high of $8.7 billion, up 11% YOY.
| Netflix Key Stats | |||
|---|---|---|---|
| Analyst Estimates for Q4 2023 | Q3 2023 | Q4 2022 | |
| Revenue | $8.7 billion | $8.5 billion | $7.9 billion |
| Earnings Per Share | $2.25 | $3.80 | $0.12 |
| Net Income | $983.9 million | $1.68 billion | $55.3 million |
Key Metric
For a streaming company like Netflix, a growing base of subscribers is essential to building revenue, both through subscription fees and ad sales.
Netflix lost net subscribers for the first time in 2022, following a surge in viewership during the pandemic. Since that time, it has posted uneven net subscriber additions in its bid to reestablish growth.
However, the $6.99 ad-supported plan that the company announced late in 2022 has accelerated subscriber growth. The company said earlier this month that this subscription tier had reached 23 million active users, up from 15 million in November.
Investors should watch for information from Netflix on how the password-sharing crackdown has impacted subscriptions as well. Bank of America analysts expect this policy, now also several quarters old, to continue to fuel accelerating net subscription growth, with an estimated 9 million total net added subscriptions for this quarter compared with 7.7 million a year earlier.
Business Spotlight
Netflix aims to increase its value proposition for customers so that it can justify raising prices on subscription plans. In November, the company increased the monthly fee for two of its subscription tiers.
Investors should watch for signs that customers view the increases as reasonable in the upcoming earnings report. Netflix’s expansion into the gaming space, which began two years ago but accelerated in the last several months, could be a key factor in the company’s decision to increase prices.
Netflix shares rose last spring and early summer before falling between August and October. The stock finished the year with another rally, bringing its 1-year return to about 36%.