Netflix stock surges 14%, reverses subscriber slumpย ย
ย ย
Earnings season is once again upon us and already we’ve seen some amazing movements in the markets. Netflix traders and investors are smiling as the streaming giant released an excellent Q3 earnings report.ย ย ย
The company reversed its huge subscriber losing streak and instead gained 2.4 million new subscribers, from a forecast of 1 million, in the third quarter of 2022. Netflix also generated nearly $500 million in free cash flow.ย ย ย
The reversal is a welcome change for the struggling company and a boom for traders capitalising on the huge price movements the Q3 report generated.ย ย
Today, we take a look at Netflix shares, and the company’s performance in the past year and ask that all-important question – is the stock a buy, sell or hold?ย ย
8 top stocks you shouldnโt missย
Great earnings report for Netflixย ย
Netflix saw its shares skyrocket more than 13% in after-hours trading on October 20.ย ย
Revenue for the quarter grew 5.9% to $7.93bn, beating Wall analystsโ projections. Profit of $3.10 a share also beat estimates.ย ย
A strong line-up of hit programs attracted millions of new viewers in the third quarter. A new season of ‘Stranger Things’, one of the most popular TV series in the world, and the true crime drama ‘Monster: The Jeffrey Dahmer Story’, its second-most-popular English-language original series.ย ย
Netflix used its moment in the spotlight to call shade on competitors; the company believes its rivals have combined operating losses of more than $10 billion compared to Netflix’s operating profit of $5 billion year-to-date.ย ย
In its Q3 report Netflix says it has higher engagement than its rivals:ย ย
In the UK, Netflix accounts for 8.2% of video viewing – 2.3x Amazon and 2.7x Disney+.ย ย
In the US, Netflix accounts for 7.6% of TV time, 2.6x Amazon, and 1.4x Disney + Hulu + Hulu Live.ย ย
The company said in a letter to shareholders: “After a challenging first half, we believe weโre on a path to reaccelerate growth. The key is pleasing members. Itโs why weโve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us.”ย ย
Donโt miss out – Get Daily Trading Signalsย ย ย
Budget subscriptions and adsย ย
Earlier in 2022, Netflix announced plans to change its subscription plans to grab a wider audience. The company plans to sell subscriptions at a lower $7 per month price from November 2022. The company believes that it can raise subscribers to 228 million by end of the year.ย ย
Netflix added: “As weโve been discussing over the past few quarters, improving our pricing strategy is an important near-term focus. We announced that weโll be launching an ad-supported subscription plan on November 1 in Canada and Mexico; November 3 in Australia, Brazil, France, Germany, Italy, Japan, Korea, the UK, and the US; and November 10 in Spain.ย ย ย
ย “Cumulatively, these 12 markets account for ~$140 billion of brand advertising spend across TV and streaming, or over 75% of the global market.”ย ย
Advertising revenue will be a major driver of revenue for the company.ย ย
Stay up to date on the latest market newsย
Netflix stated: “The reaction from advertisers so far has been extremely positive and we believe that more choice, especially for more price-conscious consumers, will translate into meaningful incremental revenue and operating profit over time.ย ย ย
“That said, itโs still very early days and, since weโre keeping our existing plans ad-free, it will take us time to build up our membership base and the associated ad revenue.”ย ย
Is Netflix a buy?ย ย ย
Netflix is experiencing a boom as its share price rises. Beating Wall Street estimates is great for any company reporting its earnings but it’s especially good for Netflix as the company has been struggling in 2022. We’ve seen highs of $691 in November 2021 to lows of $166 in May 2022. At the time of writing, shares are around $240.ย ย
Here’s what CMTrading analysts have to say:ย ย
Analyst consensus – Buyย ย
This is based on 30 analysts offering 12-month price targets for NETFLIX in the last 3 monthsย ย
Analyst price target:ย ย
The average price target is $270.59 with a high forecast of $365.00 and a low forecast of $157.ย ย
The average price target represents a 12.40% Increase from the last price of $240.73.ย ย
Netflix said: Ultimately though, we believe some of our competitors will seek to build sustainable, profitable businesses in streaming – either on their own or through continued industry consolidation.ย ย ย
“While itโs early days, weโre starting to see this increased profit focus – with some raising prices for their streaming services, some reigning in content spending, and some retrenching around traditional operating models which may dilute their direct-to-consumer offering. Amidst this formidable, diverse set of competitors, we believe our focus as a pure-play streaming business is an advantage. Our aim remains to be the first choice in entertainment, and to continue to build an amazingly successful and profitable business.”ย ย
Become a better trader – Join our webinarsย ย ย
Future of the companyย ย
As for the future of the company, Netflix stated that it will invest in gaming and advertising as a core of its business model.ย ย
Netflix said: “Thereโs no change to our capital allocation approach. Our priority is to continue to invest appropriately in our business for the long term, including new initiatives such as games and advertising, followed by selective acquisitions. After that, excess cash above our minimum cash levels (equivalent to roughly two months of revenue) will be returned to shareholders through share repurchases.”ย ย
Treat your trading like a businessย
More company earnings are on the wayย ย
The October earnings season is in full swing and many of the worldโs biggest companies will report their results, creating major trading opportunities.ย ย
Full list of top stocks: Q3 earnings releaseย ย ย
Wednesday, October 19, 2022ย ย ย
Tesla (TSLA) 22.65B / 698.98Bย ย ย ย
Tuesday, October 25, 2022ย ย ย
Alphabet A (GOOGL) 71.34B / 1.29Tย ย ย ย ย ย ย ย ย
Twitter Inc (TWTR) 1.29B / 37.58Bย ย ย
Wednesday, October 26, 2022ย ย ย
Microsoft (MSFT) 49.86B / 1.75Tย ย ย ย ย ย ย
Meta Platforms (META) 27.58B / 358.65Bย ย ย ย ย ย
Thursday, October 27, 2022ย ย ย
Apple (AAPL) 88.73B / 2.25Tย ย ย ย ย ย ย ย ย
Amazon.com (AMZN) 127.76B / 1.17Tย ย ย
Ready to start trading? Open an account todayย ย ย ย
Join CMTrading, the largest and best-performing broker in Africa, and discover more opportunities with an award-winning broker.ย Register here to get startedย ย ย ย ย
Follow CMTrading onย Facebook,ย Instagram,ย LinkedIn,ย Twitter,ย andย YouTubeย ย ย
ย
