Netflix Stock (NASDAQ:NFLX)
The expectation for Netflix’s (NASDAQ:NFLX) first-quarter earnings report, which is scheduled to be released after the close of trading on Tuesday, is a little bit murky.
The corporation continues to dominate the market for streaming video and has a commanding lead. However, it is having trouble showing real growth because of the sluggish economy, the growing strong competition, and the seemingly saturated state of the streaming industry in the United States.
Netflix (NASDAQ:NFLX) is anticipating revenue for the quarter of $8.2 billion, which represents a 4% increase from the previous year. This is in comparison to an increase of 2% in the previous quarter and 16% in the same period one year prior. Profit projections for Netflix have increased to $2.82 per share from $1.33 per share a year ago.
According to FactSet’s measurements, the widespread opinion on Wall Street predicts that the company will report revenue of $8.2 billion and a profit of $2.86 per share. It is anticipated that the number of subscribers increased by 2.26 million, bringing the grand total to 233 million.
Wall Street anticipates the corporation to accelerate its pace of operations during the June quarter: The general consensus forecasts revenue of $8.5 billion, which represents an increase of 8% compared to the same period the previous year, along with profits of $3.07 per share and 3.7 million net subscriber additions.
This will be the first time that Netflix has reported its numbers without providing a specific projection for the increase of its subscriber base, other than to indicate that the net total should be positive. Another first for the company is that founder Reed Hastings, who was recently promoted to the position of executive chairman, will not be participating in the earnings call this time around. Ted Sarandos and Greg Peters have been promoted to the position of co-CEO.
Netflix’s plan to accelerate growth employs a two-pronged approach. The firm recently introduced a low-end subscriber tier that is supported by advertisements, and investors will be looking to Netflix to provide some detail on how it has been accepted so far in the market. Netflix has also pledged to cut down on the sharing of passwords, but the streaming service has not yet taken any practical action in the majority of its markets to make this promise a reality.
On both fronts, it is far too soon to provide an accurate assessment of long-term success. During this time, there will be a discussion on the upcoming conference call regarding a recent decision to lower pricing in approximately one hundred of the smaller markets in an apparent effort to increase the number of subscribers. The sum of the company’s subscribers has leveled off at a little less than 75 million, reflecting a loss of approximately one million customers in the market that encompasses the United States and Canada over the course of the past four quarters combined.
Steven Cahall, an analyst at Wells Fargo, is of the opinion that the outcomes of the first quarter will be “less about quarterly results and more about the coming U.S. paid sharing implementation.” He believes that the price for additional members will be closer to $8 per month, which is higher than what some investors anticipate it will be. Cahall is also of the opinion that the corporation would most likely comment positively on the outlook for the incremental revenue growth that will result from the crackdown. He maintains his Overweight rating and $400 target price for the stock, and he believes that EPS estimates can skyrocket if the business speaks bullishly on the prognosis for a crackdown on password sharing.
Citi analyst Jason Bazinet, who has a Buy rating and a $400 target price on Netflix shares, warns that the March quarter results could be “confusing,” given the early stage of the ad strategy, the slower-than-expected rollout of new password-sharing restrictions, and the price cuts in many minor markets. Bazinet has a Buy rating and a $400 target price on Netflix shares. “Keep your eye on the prize,” as well as “do not overreact” to the results, is some advice that we would give to investors. According to Bazinet, the password crackdown will not result in an increase in revenue; nonetheless, the company believes that the ad tier has the potential to increase the subscriber base by 65 million, with average revenue that is higher than the traditional subscription model.
According to Piper analyst Thomas Champion, who has a Neutral rating on the stock and a target price of $325, “the setup looks mixed” for the company’s first-quarter results. He believes that the number of new net subscribers will fall short of the projections provided by Wall Street, and he claims that the programming slate was less robust than it was in the previous quarter. The following is an excerpt from an article written by Champion: “We continue to view Netflix as a story in transition.”
Analyst Thomas Swinburne from Morgan Stanley, who has an Equal Weight rating on Netflix stock and a target price of $350, says he sees both the paid sharing and ad-tier prospects as “significant,” but he feels that they are both currently embedded in the company’s share price. Swinburne has a $350 price objective on Netflix Stock. He also comments that the introduction of a password crackdown being slower than predicted could potentially enhance net subscriber gains in the March and June quarters.
The price of Netflix Stock has increased by around 17% this year.
Featured Image: Freepik @ Grinvalds
