Netflix Stock (NASDAQ:NFLX)
Netflix (NASDAQ:NFLX) reported fourth-quarter 2022 earnings of $0.12 per share, falling 74.47% short of the Consensus Estimate. The figure fell 91% year on year.
Revenues of $7.85 billion increased 1.9% year on year but fell 0.18% short of the consensus mark. Revenues increased 10% year over year on a currency-neutral basis.
On a reported basis, average revenues per membership decreased 2% year over year but increased 5% on a foreign-exchange neutral basis.
The streaming service added 7.66 million paid subscribers globally, exceeding its previous estimate of 4.5 million users. In the last quarter, it added 8.28 million paid subscribers.
Netflix had 230.75 million paid subscribers worldwide at the end of the fourth quarter, up 4% year over year and exceeding our estimate of 227.59 million.
Despite growing competition from Amazon (NASDAQ:AMZN), Disney (NASDAQ:DIS), and Apple (NASDAQ:AAPL), Netflix benefited from a strong content portfolio in the reported quarter.
Following the announcement of the better-than-expected results, Netflix stock was nearly 6% in pre-market trading.
In the last year, Netflix stock has underperformed Apple and Disney while outperforming Amazon. While Netflix has lost 37.9% of its value, Apple, Disney, and Amazon have lost 17.8%, 32.9%, and 38.3%, respectively.
Along with Ted Sarandos, Netflix announced the appointment of Greg Peters as Co-CEO. Reed Hastings has been named executive chairman.
Revenue Breakdown by Segment
The United States and Canada (UCAN) reported revenues of $3.60 billion, an 8.6% increase year on year and 45.8% of total revenues. On a currency-neutral basis, ARPU increased 10% from the previous quarter.
UCAN’s paid subscriber base fell 1.2% from the previous quarter to 74.30 million, exceeding our estimate of 73.84 million. The company gained 0.91 million paid subscribers, compared to 1.19 million in the previous quarter.
Europe, the Middle East, and Africa (EMEA) reported $2.35 billion in revenue, a 6.9% decrease year on year and accounting for 29.9% of total revenue. On a currency-neutral basis, ARPU increased 5% from the previous quarter.
The paid subscriber base in EMEA increased by 3.6% year on year to 76.73 million, exceeding our estimate of 74.53 million. The company added 3.2 million paid subscribers, compared to 3.54 million in the previous quarter.
Latin America’s (LATAM) revenues increased 5.5% year on year to $1.02 billion, accounting for 13% of total revenues. On a currency-neutral basis, ARPU increased by 7% from the previous quarter.
LATAM’s paid subscriber base increased 4.4% year on year to 41.70 million, exceeding our estimate of 40.69 million. Compared to the previous quarter’s net addition of 0.97 million, the company gained 1.76 million paid subscribers.
Asia Pacific (APAC) revenues of $857 million were down 1.6% year on year, accounting for 10.9% of total revenues. On a currency-neutral basis, ARPU fell 17% year over year.
The paid subscriber base in APAC increased 16.5% year on year to 38.02 million but fell short of our estimate of 38.53 million. In the third quarter, the company added 1.8 million paid subscribers, which decreased by 30.2% year on year.
Marketing costs rose 4.9% year on year to $831.6 million. Marketing expenses increased 30 basis points (bps) to 10.6% of revenues.
Operating income fell 13% year on year to $549.9 million, exceeding Netflix’s guidance of $330 million, owing to higher revenues and lower hiring. The operating margin shrank 120 basis points year on year to 7%, primarily due to unfavorable currency.
The Balance Sheet and the Free Cash Flow
Netflix had $6.06 billion in cash and cash equivalents as of December 31, 2022, up from $6.11 billion on September 30, 2022.
Long-term debt stood at $14.4 billion as of December 31, 2022, up from $13.9 billion as of September 30, 2022.
Streaming content obligations stood at $21.83 billion as of December 31, 2022, up from $21.57 billion as of September 30, 2022.
Netflix reported $332 million in free cash flow, compared to $471.9 million in the previous quarter.
Guidance
Netflix anticipates $2.82 per share earnings in the first quarter of 2023, a 20% decrease from the previous quarter’s figure.
The Consensus Estimate for the same is $2.97 per share, which is currently higher than the company’s estimate but represents a 15.86% decrease from the previous quarter’s figure.
Total revenue is expected to be $8.172 billion, representing a 3.9% increase year on year. The consensus revenue estimate is $8.17 billion, which is nearly in line with the company’s forecast and represents a 3.88% increase over the previous quarter’s figure.
The quarterly operating margin is expected to be 19.9%, down from 25.1% in the previous quarter.
Netflix expects revenue to accelerate in 2023 on a foreign-exchange-neutral basis. Paid net additions are expected to be higher in the second quarter of 2023 compared to the first quarter due to the expanded rollout of paid sharing.
Furthermore, Netflix anticipates an operating margin of 21-22%. The range, including forex, is expected to be 18-20%.
Featured Image: Pexels @ Anastasia Shuraeva
