{"id":605689,"date":"2024-01-22T18:35:56","date_gmt":"2024-01-22T15:35:56","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/netflix-earnings-preview-wall-street-crowns-its-streaming-king-for-now\/"},"modified":"2024-01-22T18:35:56","modified_gmt":"2024-01-22T15:35:56","slug":"netflix-earnings-preview-wall-street-crowns-its-streaming-king-for-now","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/netflix-earnings-preview-wall-street-crowns-its-streaming-king-for-now\/","title":{"rendered":"#Netflix Earnings Preview: Wall Street Crowns Its Streaming King, For Now"},"content":{"rendered":"
\n

\n Global streaming giant Netflix is gearing up to report its fourth-quarter and full-year 2023 earnings after the market close on Tuesday (Jan. 23), and its progress in building its advertising tier to scale and growth following a third-quarter gain of 9 million subscribers are among the topics in Wall Street\u2019s focus.<\/p>\n

\n Among the streamer\u2019s big content launches of the final quarter of 2023 were the likes of Squid Game<\/a>: The Challenge<\/em>, new seasons of Lupin<\/em> and Sex Education<\/em>, the Money Heist<\/em> spin-off Berlin<\/em>, the conclusion of The Crown<\/em>, awards season contenders, such as Bradley Cooper\u2019s Maestro<\/em> and Todd Haynes\u2019 May December<\/em>, Aardman Animation\u2019s Chicken Run: Dawn of the Nugget<\/em> and Zack Snyder\u2019s Rebel Moon<\/em> \u2013 Part One: A Child of Fire<\/em>.<\/p>\n

\n Some experts have raised their stock price targets heading into the earnings report amid positive investor sentiment, some forecasts that it will exceed the Wall Street average subscriber growth forecast of 8.8 million and some experts\u2019 conclusion that Netflix has already won the so-called \u201cstreaming wars\u201d and emerged as the clear \u201cking\u201d of the streaming world.<\/p>\n

\n On the other hand, experts expect subscriber growth momentum to slow in the first quarter, Amazon is competing for the streaming advertising pie, and investors are looking for more color on the company\u2019s gaming business strategy. <\/p>\n

\n With that backdrop, Wall Street experts have shared their predictions for Netflix\u2019s fourth-quarter earnings update. Here is a look at key analyst forecasts and commentary.<\/p>\n

\n TD Cowen<\/strong> analyst John Blackledge<\/strong>, in a Jan. 9 report, boosted his Netflix stock price target by $65 to $565<\/strong>, based on his long-term forecasts, and stuck to his \u201coutperform\u201d rating. Investors will be \u201cfocused on net adds, ad tier and paid sharing\u201d updates in the earnings report and management interview, he argued. <\/p>\n

\n \u201cWe expect paid net adds of 9.03 million reflecting seasonality and a strong slate of fourth-quarter originals (management expects net adds to be similar to the third quarter),\u201d Blackledge wrote. \u201cOur latest annual ad buyer survey suggests a burgeoning ad opportunity for Netflix, while our consumer survey shows Netflix remains the top choice for living room viewing in the fourth quarter of 2023.\u201d<\/p>\n

\n The TD Cowen expert highlighted moves that should boost the ad tier. \u201cNetflix in the fourth quarter also phased out their basic plan in six additional countries, which should help further drive adoption of the ad tier,\u201d he explained.<\/p>\n

\n Blackledge also cited results from a recent survey as positive for Netflix\u2019s ad future. \u201cWe asked 50 ad buyers whether their largest client expects to advertise on Netflix in 2024,\u201d he summarized. \u201cOn a spend-weighted basis, 50 percent expect to advertise on Netflix in 2024, while another 21 percent are unsure.\u201d His takeaway: \u201cWe view the potential ad buyer adoption as positive for Netflix\u2019s burgeoning ad tier.\u201d<\/p>\n

\n On Wednesday, Bank of America<\/strong> analyst Jessica Reif Ehrlich<\/strong> reiterated her \u201cbuy\u201d rating, while raising her price target by $60 to $585<\/strong> in a report entitled \u201cCrowning the king in streaming.\u201d<\/p>\n

\n She outlined her take on the state of streaming this way: \u201cIt is becoming increasingly clear that Netflix has won the \u2018streaming wars.\u2019 Over the last 18 months, changing market dynamics, investor focus on profitability, and the various talent strikes have led several media<\/a> companies to re-evaluate their streaming aspirations.\u201d <\/p>\n

\n Sector trends, including \u201creducing content spend\/output, increasing third-party licensing,\u201d have been \u201ca tacit acknowledgment that not all media companies will be able to achieve Netflix\u2019s global reach and scale in streaming,\u201d Reif Ehrlich highlighted. \u201cOverall, we believe that this is a win-win for the industry and Netflix. For Netflix, the availability to purchase third-party content will likely drive additional efficiencies with its content spend going forward as the company no longer needs to finance as much higher-risk new production and can supplement more concentrated \u2018bets\u2019 with well-known established content.\u201d As evidence, she pointed to the fact that \u201cthe recent top 10 list from Netflix has been dominated by third-party content, underscoring the high hit rate that this content has on its platform.\u201d<\/p>\n

\n Reif Ehrlich is also optimistic on Netflix\u2019s ad upside. \u201cAt the $6.99 price point, the ad-supported tier provides an attractive low-priced option for \u2018borrowers\u2019 who still wish to access the Netflix service,\u201d she explained. \u201cIn our view, the broader crackdown on password sharing will be an accelerant to Netflix\u2019s ad-supported tier.\u201d<\/p>\n

\n The Bank of America analyst said she remains \u201cbullish on the longer-term opportunity\u201d in AVOD for the streaming giant as \u201cNetflix\u2019s pricing strategy should drive scale and new bundling agreements (e.g., Netflix\/Max) lower the retail price for consumers and decrease marketing spend and churn for Netflix.\u201d<\/p>\n

\n Meanwhile, Wells Fargo<\/strong> analyst Steven Cahall<\/strong> on Wednesday boosted his fourth-quarter subscriber growth forecast from 9.5 million to 10.4 million, based on the estimated impact of the company\u2019s password-sharing crackdown and broader user trends. \u201cWe\u2019re comfortable that net adds will top sellside\u2019s consensus of around 9 million and buyside\u2019s bogey of around 10 million,\u201d he emphasized.<\/p>\n

\n But the password-sharing crackdown\u2019s benefit will slow down from here, the expert predicted. \u201cWe assume that paid sharing will be a diminishing benefit for the first half of \u201924 as Netflix works into the later cohorts,\u201d he explained. \u201cWe forecast +4.2 million for the first quarter \u201924 versus +1.8 million in the first quarter of \u201923. We assume that second quarter to fourth quarter \u201924 net adds will be below \u201923 levels as the paid sharing benefit dwindles.\u201d<\/p>\n

\n Given that the password-sharing crackdown\u2019s impact seems quite clear by now, Cahall sees investor debates about Netflix\u2019s growth and stock outlook \u201cmore muted\u201d until the back half of 2024. The streamer\u2019s ad push and its cost and benefit will likely be among the key topics for Wall Street, he predicted. <\/p>\n

\n The analyst estimated that Netflix ended 2023 with 13 million ad-tier subscribers. \u201cFor U.S.\/Canada AVOD, 2 hours per day viewing x eight ad spots per hour x $30 cost per thousand x 30 days per month = $14 per month ad average revenue per user x about 2 users per account = $29 per month potential U.S.\/Canada account ad average revenue per user (ARPU),\u201d he shared his math. \u201cHowever, it\u2019s running closer to $9 per month, reflecting (Microsoft ad unit) Xandr\u2019s cut, frequency caps and lower sell-out due to limited reach.\u201d <\/p>\n

\n Cahall\u2019s conclusion: \u201cWe think Netflix\u2019s number 1 initiative for 2024 will be investing to grow ads longer-term.\u201d He has an \u201coverweight\u201d rating and $460<\/strong> price target on Netflix shares.<\/p>\n

\n Evercore ISI<\/strong> analyst Mark Mahaney<\/strong>, who has an \u201coutperform\u201d rating with a $500 stock price target on Netflix, in a Jan. 11 report argued that signs of an acceleration in ad tier momentum \u201cshows promise of scale.\u201d <\/p>\n

\n Netflix earlier in the month disclosed that it has reached 23 million global monthly average users (MAUs) for its ad-supported plan. \u201cThis suggests 8 million MAU adds quarter-over-quarter, accelerating from the 5 million per quarter growth cadence in the prior three quarters,\u201d the expert noted. \u201cEqually important is the consistent engagement levels that these AVOD subscribers demonstrate, with 85 percent of them streaming over 2 hours per day \u2013 which we believe is in line with the engagement level of the ad-free users.\u201d<\/p>\n

\n What will the ad tier users mean for Netflix\u2019s fourth-quarter subscriber growth? Mahaney estimated that 23 million ad tier MAUs \u201cequate to approximately 12-15 million subscript<\/a>ions, or approximately 4-5 million gross adds contribution to the fourth quarter.\u201d This suggests that the ad tier has reached roughly 5 percent of Netflix\u2019s global subscriber base, he continued. \u201cNot a significant number yet, but if this growth cadence continues, Netflix may well reach 50 million MAUs and close to 10 percent of its subs base by the end of 2024.\u201d <\/p>\n

\n Mahaney\u2019s conclusion if that materializes: \u201cNow we\u2019re talking real scale which could catalyze more significant and permanent ad budget shift to Netflix. We believe AVOD brings Netflix incremental gross
adds and serves as a total addressable market expander and indirect pricing power booster.\u201d And the Evercore ISI expected emphasized: \u201cWe believe that amidst the market\u2019s laser focus on Netflix paid sharing benefits, this AVOD incrementality has been underappreciated by investors.\u201d<\/p>\n

\n On Monday, Mahaney noted that he forecasts global subscriber net additions of 8.2 million for the fourth quarter, compared with a Street-wide average estimate of 8.8 million. But he added that \u201cwe see modestly greater upside versus downside variance for the Street\u2019s first-quarter net adds (4.3 million) given historical seasonality of relatively even fourth- and first-quarter net adds and our survey suggesting further paid sharing upside and potentially sustaining tailwind of AVOD upside.\u201d<\/p>\n

\n Meanwhile, MoffettNathanson<\/strong> analyst Michael Nathanson<\/strong> and his team boosted their fourth-quarter Netflix subscriber forecast, based on \u201cthe success of its password-sharing crackdown and its ad tier,\u201d by 2 million to 10 million on Monday. \u201cAs a result of our improved estimates and a higher market multiple, we raise our Netflix price target by $50 to $440<\/strong>,\u201d while sticking to a \u201cneutral\u201d rating, the expert wrote.<\/p>\n

\n \u201cThis stronger-than-expected growth for the quarter is backed by fresh data from our friends at HarrisX bearing the surprising finding that, despite strike-impacted weak content slates, streaming increased its penetration of U.S. households after several quarters of either shrinkage or stalled growth,\u201d Nathanson highlighted. \u201cThough this could also perhaps be due to the fact that the strikes hit linear (TV)\u2019s fall slate even worse. It seems Netflix\u2019s growth has been relatively unperturbed by the strikes, though data from Nielsen indicates this may be due to the generosity (or desperation) of its competitors<\/p>\n

\n Guggenheim<\/strong> analyst Michael Morris<\/strong>, who has a \u201cbuy\u201d rating on Netflix and a stock price target that he had raised by $40 to $500<\/strong> in early December, estimated slightly lower ad tier user gains in the fourth quarter than other analysts. He projects ad users to hit 7.7 million (for a 2.35 million net gain) as of the end of 2023, \u201cversus consensus of 9.5 million (3.1 million net adds).\u201d <\/p>\n

\n He described Netflix\u2019s engagement report for the first half of 2023 in a bullish way though. \u201cNetflix is sharing detail on a significant leadership position relative to streaming competitors,\u201d Morris argued. \u201cWe would expect it to be unlikely that any other streamer is seeing similarly large viewership levels and therefore will not share data en masse anytime soon.\u201d<\/p>\n

\n The Guggenheim expert, however, summarized Netflix\u2019s challenge for the new year in the headline of his report: \u201cWith confidence high, how does Netflix delight investors in 2024?\u201d<\/p>\n

\n \u201cWe feel that the analyst and investor narrative has seen a 180-degree turn from the cautious interpretation of CFO comments in mid-September to crowning the company as an unassailable media winner into fourth-quarter earnings,\u201d he concluded. \u201cWe share confidence in the Netflix model (content sourcing and distribution leader) and execution but also believe incremental progress on key initiatives (password sharing, advertising monetization) is key to further share appreciation. We also increasingly believe that a more robust sports media strategy that leverages reach leadership in conjunction with
high-profile, live content is an opportunity that the company should be seizing to fuel more growth.\u201d<\/p>\n

\n In contrast, Benchmark<\/strong> analyst Matthew Harrigan<\/strong> remains one of the biggest Netflix bears on Wall Street with a \u201csell\u201d rating, even though he increased his stock price target by $75 to $425<\/strong> on Friday, noting that this was \u201calmost entirely off (generously) conceding to our market-linked valuation relative to the Nasdaq 100 rather than the S&P 500.\u201d <\/p>\n

\n \u201cWe are not perma-bears,\u201d he wrote, but emphasized in his report\u2019s headline: \u201cRemain Cautious Despite Netflix Stock Price Breakout.\u201d <\/p>\n

\n Explained Harrigan: \u201cWe still feel Netflix\u2019s long-term business characteristics are more akin to other large media companies as streaming for all entrants continues to cannibalize linear viewing, especially as advertising gains prominence, rather than the higher growth Nasdaq 100 technology<\/a> companies. This currently contravenes market consensus.\u201d<\/p>\n

\n The analyst summarized his fourth-quarter expectations this way: \u201cWe do believe there could be upside to our 8.8 million member growth assumption to marginally above 10 million.\u201d<\/p>\n

\n Harrigan will look out for possible latest commentary from Netflix management on content strategy. \u201cNetflix is showing improved cost discipline,\u201d the Benchmark expert noted. \u201cNetflix is now prioritizing quality rather than volume on a global basis, although it retains particular advantages in its foreign programming. It reduced the number of 2023 films and TV shows by around 130, a 16 percent decline after increasing output every year over the last decade, with particular acceleration in the second half of 2023 off the SAG and WGA strikes. It is also apparent Netflix is now more amenable to selectively licensing content, especially classic movies<\/a>.\u201d<\/p>\n

\n Meanwhile, Michael Pachter<\/strong>, analyst at Wedbush Securities<\/strong>, a former Netflix bear, continues to see upside for the streamer. He has an \u201coutperform\u201d rating and $525<\/strong> price target on the stock. <\/p>\n

\n \u201cNetflix remains on Wedbush\u2019s Best Ideas List, given our view that the company can generate significantly more free cash flow than its guidance suggests,\u201d he wrote in December. \u201cWe think Netflix has reached the right formula with global content creation, balancing costs and increasing profitability, while its password-sharing crackdown and eventually its ad-supported tier should further boost cash generation.\u201d<\/p>\n

\n Pachter summarized his take on Netflix\u2019s recent push on those two fronts this way: \u201cThe primary takeaway from Netflix\u2019s third-quarter earnings was that the password-sharing crackdown continued to drive new standalone subscribers who previously piggy-backed on others\u2019 accounts, while the crackdown also added meaningfully to ARPU through Netflix\u2019s \u2018extra member\u2019 option (where piggy-backers can remain on an account for an additional monthly fee). We think that the ad tier, while still dilutive to ARPU, is limiting typical churn and elevating overall subscriber numbers by offering prospective churners a lower cost option to remain subscribers.\u201d<\/p>\n

\n In terms of the streamer\u2019s ad business outlook, the Wedbush analyst predicted: \u201cAs Netflix continues to add ad-tier subscribers, and as it increases its ad delivery rates, its ad-tier will also drive ARPU higher while continuing the limit churn.\u201d<\/p>\n<\/p><\/div>\n

If you liked the article, do not forget to share it with your friends. Follow us on\u00a0Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n

\n

If you want to read more Like this articles, you can visit our Social Media category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n

Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Global streaming giant Netflix is gearing up to report its fourth-quarter and full-year 2023 earnings after the market close on Tuesday (Jan. 23), and its progress in building its advertising tier to scale and growth following a third-quarter gain of 9 million subscribers are among the topics in Wall Street\u2019s focus. Among the streamer\u2019s big…<\/p>\n","protected":false},"author":1,"featured_media":605690,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/www.hollywoodreporter.com\/wp-content\/uploads\/2024\/01\/GettyImages-1921110814.jpg?w=1024","fifu_image_alt":"","footnotes":""},"categories":[17],"tags":[1377],"class_list":["post-605689","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-social-mediaa","tag-netflix"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/605689","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=605689"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/605689\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/605690"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=605689"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=605689"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=605689"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}