Netflix (NFLX, Financial) anticipates reaching nearly 282 million total subscribers this quarter, a significant rise from 247 million in the same period last year. Despite strong recent stock performance, potential disappointments in subscriber growth or advertising revenue could affect the streaming platform. The company, known for hit series like "Monster" and "Red Notice," will release its Q3 earnings report after the market close on October 17.
Investor focus is primarily on future guidance, as Netflix's stock is highly valued. Analysts surveyed by FactSet expect Netflix to report adjusted Q3 earnings per share of $5.12, up from $3.73 a year ago and $4.88 last quarter. Quarterly revenue is projected to increase to $9.77 billion, up from $8.54 billion a year ago and $9.56 billion in the previous quarter. Total subscribers are expected to reach 281.5 million, up from 247.2 million last year.
Netflix's growth has been driven by its crackdown on password sharing and the introduction of a cheaper ad-supported plan. The password-sharing restrictions limit account usage outside the subscriber's household, while the ad-supported tier reduces costs for returning users and provides an additional revenue stream.
Although the ad-supported tier has helped attract more users, the company does not expect it to be a major revenue growth driver in 2024 or 2025, as the business model continues to evolve. Wedbush analyst Alicia Reese noted that Netflix plans to enhance advertising revenue contributions by 2025, with improvements in advertising solutions and live events being key factors.
Loop Capital analyst Alan Gould raised the price target to $800, maintaining a "buy" rating, citing potential growth in sports programming after an NFL game during Christmas. However, not all analysts are optimistic. Seaport Research Partners analyst David Joyce maintains a neutral rating, citing high stock valuations relative to expected growth.
As Netflix's valuation remains high, Wall Street will closely watch for any insights into the company's future outlook. Investors are eager for sustainable growth, and increased advertising revenue will be crucial. With a 44% stock price increase this year compared to the S&P 500's 22% rise, any indication of greater growth potential could further boost Netflix's stock.
