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For the third quarter of 2024, Netflix forecasts revenues to increase 14%, which equates to 19% growth on an F/X neutral basis, due to price changes in Argentina and the devaluation of the local currency relative to the U.S. dollar.
The company anticipates total revenues to be $9.77 billion, suggesting growth of 13.9% year over year. The Zacks Consensus Estimate for revenues is pegged at $9.77 billion, in line with the company’s expectation.
Netflix has projected earnings of $5.10 per share, suggesting growth of 36.7% year over year. The Zacks Consensus Estimate for the same is pegged at $5.07 per share, currently lower than the company’s expectation. The estimate has been unchanged over the past 30 days.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The company’s third-quarter results are expected to benefit from its diversified content portfolio, which involves heavy investments in the production and distribution of localized and foreign-language content.
Image Source: Zacks Investment Research
Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 3.83%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average negative surprise being 6.15%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for Netflix this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Netflix anticipates paid net additions to be lower than third-quarter 2023, which had the first full quarter impact from paid sharing. Like recent quarters, the company forecasts global ARM on a reported basis to be roughly flat year over year in the third quarter due to ongoing F/X headwinds and plan and country mix.
The streaming giant has implemented strategic initiatives that are likely to have contributed to top-line growth. A key development has been the successful rollout of ad-supported low-priced plans, which have attracted price-sensitive consumers and opened up new revenue streams. This move has not only expanded Netflix's subscriber base but also diversified its income sources.
Another significant strategy has been the crackdown on password-sharing through paid sharing options, which are now implemented in over 100 countries and represent more than 80% of Netflix's revenue base. This initiative is expected to have aided the conversion of previously shared accounts into paid subscriptions, potentially boosting both subscriber numbers and revenues in the to-be-reported quarter.
The company's growing games portfolio, featuring popular titles like Grand Theft Auto: The Trilogy, is likely to have enhanced user engagement and attracted new subscribers. In the second quarter, the company added Virgin River and Perfect Match to its gaming roster. This diversification into gaming demonstrates Netflix's commitment to providing a comprehensive entertainment experience.
Despite these positive factors, Netflix has been facing significant challenges in an increasingly competitive streaming landscape. The company contends with robust rivals such as Disney’s (DIS - Free Report) Disney+, HBO Max, Peacock, Paramount+, Apple’s (AAPL - Free Report) Apple TV+ and Amazon's (AMZN - Free Report) Prime Video services. Additionally, Netflix competes for consumer attention against traditional linear TV, YouTube, short-form content platforms like TikTok and the gaming industry.
Top-Line Growth Estimates for Q3
The Zacks Consensus Estimate for paid total streaming net membership additions is pegged at 4.75 million.
The consensus mark for third-quarter 2024 Asia-Pacific revenues is pegged at $1.09 billion, indicating 15% growth from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for Latin America revenues is pegged at $1.23 billion, suggesting a rise of 7.6% from the figure reported in the previous quarter.
Moreover, the consensus mark for EMEA revenues is pegged at $3.13 billion, suggesting an increase of 16.3% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for United States and Canada revenues is pegged at $4.31 billion, indicating a 15.6% rise from the figure reported in the year-ago quarter.
Price Performance & Valuation
Shares of Netflix have gained 48.5% in the year-to-date period compared with the Zacks Consumer Discretionary sector, Apple, Amazon and Disney’s rise of 25.9%, 18.2%, 24.3% and 4.3%, respectively.
Netflix Outperforms Sector, Peers
Image Source: Zacks Investment Research
Now, let’s look at the value Netflix offers investors at current levels. Currently, NFLX is trading at 7.32X forward 12 months sales, above its five-year median of 6.4X. Meanwhile, the Zacks Broadcast Radio and Television industry’s forward earnings multiple sits at 2.84X. The company’s valuation looks somewhat stretched compared with its own range and the industry average.
Price-to-Sales (Forward 12 Months)
Image Source: Zacks Investment Research
Investment Considerations: Balancing Risk and Reward
Netflix stands as a compelling investment prospect, dominating the global streaming landscape with its unrivaled content production prowess. The company's consistent delivery of hit shows and movies drives robust subscriber growth and retention. Strategic initiatives, including the introduction of ad-supported tiers and gaming offerings, are diversifying revenue streams and expanding market reach. The ongoing crackdown on password sharing is set to unlock significant untapped revenue potential. Netflix's strong international presence, coupled with its data-driven approach to content creation, positions it favorably to capitalize on the burgeoning global demand for streaming entertainment. The company's powerful brand, cutting-edge technology and adaptability to market trends reinforce its leadership in the dynamic digital media sector.
As streaming increasingly becomes the cornerstone of global entertainment consumption, Netflix is poised for substantial benefits, offering investors exposure to this high-growth industry. However, prudent investors should remain vigilant, monitoring content costs, subscriber growth trajectories, and the evolving competitive landscape within the streaming market.
Final Thoughts
Despite a premium valuation and fierce competition in the streaming sector, Netflix remains a compelling investment. Its first-mover advantage, extensive global footprint and a track record of producing culturally significant content set it apart. These factors, combined with Netflix's ability to adapt and innovate, suggest it is well-equipped to maintain market leadership and capitalize on the growing digital entertainment landscape, making the stock worth buying ahead of its third-quarter earnings report.
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Should You Bet on Netflix Stock Ahead of Q3 Earnings Release?
Netflix (NFLX - Free Report) is set to report third-quarter 2024 results on Oct. 17.
For the third quarter of 2024, Netflix forecasts revenues to increase 14%, which equates to 19% growth on an F/X neutral basis, due to price changes in Argentina and the devaluation of the local currency relative to the U.S. dollar.
The company anticipates total revenues to be $9.77 billion, suggesting growth of 13.9% year over year. The Zacks Consensus Estimate for revenues is pegged at $9.77 billion, in line with the company’s expectation.
Netflix has projected earnings of $5.10 per share, suggesting growth of 36.7% year over year. The Zacks Consensus Estimate for the same is pegged at $5.07 per share, currently lower than the company’s expectation. The estimate has been unchanged over the past 30 days.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The company’s third-quarter results are expected to benefit from its diversified content portfolio, which involves heavy investments in the production and distribution of localized and foreign-language content.
Image Source: Zacks Investment Research
Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 3.83%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average negative surprise being 6.15%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for Netflix this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
NFLX has an Earnings ESP of +1.37% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results
Netflix anticipates paid net additions to be lower than third-quarter 2023, which had the first full quarter impact from paid sharing. Like recent quarters, the company forecasts global ARM on a reported basis to be roughly flat year over year in the third quarter due to ongoing F/X headwinds and plan and country mix.
The streaming giant has implemented strategic initiatives that are likely to have contributed to top-line growth. A key development has been the successful rollout of ad-supported low-priced plans, which have attracted price-sensitive consumers and opened up new revenue streams. This move has not only expanded Netflix's subscriber base but also diversified its income sources.
Another significant strategy has been the crackdown on password-sharing through paid sharing options, which are now implemented in over 100 countries and represent more than 80% of Netflix's revenue base. This initiative is expected to have aided the conversion of previously shared accounts into paid subscriptions, potentially boosting both subscriber numbers and revenues in the to-be-reported quarter.
The company's growing games portfolio, featuring popular titles like Grand Theft Auto: The Trilogy, is likely to have enhanced user engagement and attracted new subscribers. In the second quarter, the company added Virgin River and Perfect Match to its gaming roster. This diversification into gaming demonstrates Netflix's commitment to providing a comprehensive entertainment experience.
Despite these positive factors, Netflix has been facing significant challenges in an increasingly competitive streaming landscape. The company contends with robust rivals such as Disney’s (DIS - Free Report) Disney+, HBO Max, Peacock, Paramount+, Apple’s (AAPL - Free Report) Apple TV+ and Amazon's (AMZN - Free Report) Prime Video services. Additionally, Netflix competes for consumer attention against traditional linear TV, YouTube, short-form content platforms like TikTok and the gaming industry.
Top-Line Growth Estimates for Q3
The Zacks Consensus Estimate for paid total streaming net membership additions is pegged at 4.75 million.
The consensus mark for third-quarter 2024 Asia-Pacific revenues is pegged at $1.09 billion, indicating 15% growth from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for Latin America revenues is pegged at $1.23 billion, suggesting a rise of 7.6% from the figure reported in the previous quarter.
Moreover, the consensus mark for EMEA revenues is pegged at $3.13 billion, suggesting an increase of 16.3% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for United States and Canada revenues is pegged at $4.31 billion, indicating a 15.6% rise from the figure reported in the year-ago quarter.
Price Performance & Valuation
Shares of Netflix have gained 48.5% in the year-to-date period compared with the Zacks Consumer Discretionary sector, Apple, Amazon and Disney’s rise of 25.9%, 18.2%, 24.3% and 4.3%, respectively.
Netflix Outperforms Sector, Peers
Image Source: Zacks Investment Research
Now, let’s look at the value Netflix offers investors at current levels. Currently, NFLX is trading at 7.32X forward 12 months sales, above its five-year median of 6.4X. Meanwhile, the Zacks Broadcast Radio and Television industry’s forward earnings multiple sits at 2.84X. The company’s valuation looks somewhat stretched compared with its own range and the industry average.
Price-to-Sales (Forward 12 Months)
Image Source: Zacks Investment Research
Investment Considerations: Balancing Risk and Reward
Netflix stands as a compelling investment prospect, dominating the global streaming landscape with its unrivaled content production prowess. The company's consistent delivery of hit shows and movies drives robust subscriber growth and retention. Strategic initiatives, including the introduction of ad-supported tiers and gaming offerings, are diversifying revenue streams and expanding market reach. The ongoing crackdown on password sharing is set to unlock significant untapped revenue potential. Netflix's strong international presence, coupled with its data-driven approach to content creation, positions it favorably to capitalize on the burgeoning global demand for streaming entertainment. The company's powerful brand, cutting-edge technology and adaptability to market trends reinforce its leadership in the dynamic digital media sector.
As streaming increasingly becomes the cornerstone of global entertainment consumption, Netflix is poised for substantial benefits, offering investors exposure to this high-growth industry. However, prudent investors should remain vigilant, monitoring content costs, subscriber growth trajectories, and the evolving competitive landscape within the streaming market.
Final Thoughts
Despite a premium valuation and fierce competition in the streaming sector, Netflix remains a compelling investment. Its first-mover advantage, extensive global footprint and a track record of producing culturally significant content set it apart. These factors, combined with Netflix's ability to adapt and innovate, suggest it is well-equipped to maintain market leadership and capitalize on the growing digital entertainment landscape, making the stock worth buying ahead of its third-quarter earnings report.