Netflix (NFLX) is scheduled to report its third-quarter results after the market closes on Thursday, but with the stock trading near all-time highs and analysts keeping an eye on further price hike announcements in the future, Netflix (NFLX) ) will again face high hurdles to overcome. Potential Catalyst.
Analysts surveyed by Bloomberg expect full-year 2024 earnings to reach about $19 per share, and 2025 earnings to be just under $23.
According to Bloomberg consensus forecasts, Wall Street expects the following in the third quarter:
Revenue: $9.78 billion (Netflix guidance: $9.73 billion), $8.54 billion in Q3 2023
Earnings per share: $5.16 (Netflix guidance: $5.10) vs. $3.73 in Q3 2023
Net subscriber growth: 4.5 million compared to 8.8 million in Q3 2023
Investors have praised the company’s foray into sports and live events. Meanwhile, the company’s advertising tier continues to gain traction. The stock price soared in response, rising about 45% since the beginning of the year.
Last week, the stock set a new closing record, ending the day at about $730 per share. The stock fell slightly, trading around $705.
However, the recent rise in stock prices is causing some concern on Wall Street.
The company recently revealed that its subscribers have watched more than 94 billion hours on the platform as part of its latest bi-annual viewership report, but year-over-year engagement levels have remained roughly flat, and pricing power has remained largely unchanged. This poses a potential headwind. This is especially important for streaming companies as consumers become more selective.
According to Deloitte’s latest Digital Media Trends Report, U.S. consumers subscribe to an average of four streaming services and spend about $61 per month. It’s difficult to retain loyal subscribers over the long term, as consumers cancel and unsubscribe from subscription plans in large numbers.
Netflix last increased the price of its Standard plan in January 2022, increasing the monthly fee from $13.99 to $15.49. At the same time, we increased the price of our premium tier by $2 to $19.99 per month. The company raised the cost of that plan again to $22.99 in October.
The company has yet to raise the price of the ad-supported service it introduced less than two years ago, making it one of the cheapest ad plans among the major streaming players at $6.99 per month.
“Given Netflix’s low cost per viewing hour, we believe the company has room to increase its U.S. prices by 12% in 2025,” said Jason Bazinet, an analyst at Citi. .
Besides the possibility of price increases, updates on the company’s fledgling advertising business will also be of primary interest to investors. Netflix revealed last quarter that it secured “more than 150% growth in prepaid ad sales contracts compared to 2023.”
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The platform also focuses on live sports and focuses on the biggest shows.
Recent acquisitions of live sports content such as NFL Christmas Day games and WWE Raw starting in January 2024, as well as upcoming movies and series such as “The Happy Gilmore 2” and “The Squid Game 2,” are also a success. He says that it has spurred on the to the company.
Netflix has previously said its goal is to make advertising a “more substantial revenue source that will contribute to sustainable and healthy revenue growth in 2025 and beyond.” This will phase out the lowest-priced ad-free streaming plan, making the $15.49 Standard plan the cheapest plan for an ad-free experience.
“We believe the introduction of an ad tier provides Netflix with another means to maximize revenue, a north star,” Morgan Stanley analyst Ben Swinburne said in an earnings preview.
He added that the “new normal” in Hollywood, with less competition for content and more studios opting for licensing deals, will inevitably “favor Netflix.” He reiterated his “overweight” rating and raised his price target for the stock from $780 to $820.
“After this volatile period of media turmoil, Netflix has emerged into a leadership position that almost no one expected nearly a decade ago,” he said.
Netflix stock is trading at all-time highs as investors focus on a rise in the stock price as the next catalyst. (Courtesy: Getty Images) (Wachiwit via Getty Images)
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canalEmail LinkedIn, alexandra.canal@yahoofinance.com.
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