As we step into the Q1 earnings season, all eyes are on Netflix (NASDAQ:NFLX) as it prepares to unveil its quarterly report on Thursday, April 18, post-market close. The streaming giant has been a standout performer in recent quarters, but the burning question remains: can it sustain its impressive streak into 2024? Let’s delve into the details in this comprehensive analysis.
Ups and Downs of Netflix’s Journey
Significant shifts have marked Netflix’s trajectory, notably, its subscriber losses in the first half of 2022, raising doubts about its position within the coveted FAANG group. While Bank of America’s “Magnificent 7” initially excluded Netflix, recent arguments suggest otherwise, highlighting the company’s resurgence in performance.
Projections and Expectations for Q1
Amidst the anticipation, Netflix’s Q1 earnings estimates suggest a 13% revenue growth, with subscriber numbers continuing to be a pivotal metric for market sentiment. Analysts anticipate the addition of approximately 4.88 million subscribers in Q1, driven by strategic initiatives such as the ad-supported plan and crackdowns on password sharing.
Consensus estimates further indicate a substantial 56% rise in Netflix’s Q1 earnings per share (EPS), with promising prospects for full-year EPS growth exceeding 41%. A combination of factors including rising subscriber numbers, robust pricing strategies, increased ad revenues, and cost optimizations are expected to fuel Netflix’s earnings growth.
Long-Term Outlook and Analyst Ratings
Morgan Stanley’s Benjamin Swinburne forecasts a promising long-term earnings growth trajectory for Netflix, projecting a CAGR of 25% between 2024 and 2028. Despite varying analyst sentiments, Netflix maintains a “Moderate Buy” consensus rating on Wall Street, albeit being the lowest-rated FAANG stock.
Valuation and Growth Drivers
Netflix’s current valuation, trading at a next 12-month price-to-earnings (PE) multiple of 36.2x, positions it as the second-highest among FAANG peers, trailing only behind Amazon (NASDAQ:AMZN). However, growth drivers such as the ongoing crackdown on password sharing and anticipated expansion in the advertising business provide optimism for prospects.
The recent deal with World Wrestling Entertainment (WWE) underscores Netflix’s strategic moves into live streaming, presenting opportunities for differentiated content and favorable economics. As Netflix navigates high expectations following its 2024 rally, the company faces the challenge of justifying its market gains with robust financial performance amidst a dynamic streaming landscape.
Featured Image: Megapixl
Author Faith Yakubu 
