Netflix reports earnings today! Where is the stock headed?

Netflix is subscriber-based, so the growth of the company is purely based on subscriber growth and that is what will be evaluated today at Wall Street. The subscriber growth moves Netflix stock far more than other metrics.

Netflix recently evaluated its Squid Game at nearly $900 million, which raises questions on how that evaluation was achieved. Well, the company mentions, “We measure the impact of our originals on our ability to acquire new members and engagement, which is correlated with retention of existing members,” the company explains on its investor relations website. “We also seek reasonable economics relative to other exclusive content on a cost per hour viewed. We also consider critical acclaim and awards for our originals and the impact original series may have on enhancing our brand and attractiveness of our service which helps with member growth.”

image

Image Courtesy Barron’s

In a research note on Monday, Loop Capital analyst Alan Gould forecasts 4.1 million subscriber net adds for Netflix in the September quarter—above the company’s guidance of 3.5 million—and 9 million for the fourth quarter.

Netflix reports third-quarter results after the close of trading Tuesday. All told, Wall Street analysts are looking for revenue of $7.48 billion and profits of $2.56 a share, with paid net adds of 3.86 million. For the December quarter, the consensus estimate calls for $7.67 billion in revenue and profits of $1.11 a share.

Netflix shares closed up 1.5% Monday, to $637.97. Shares are up 20% over the last 12 months versus a 29% gain for the S&P 500.

With all the news around Netflix, what do you think is Netflix overpricing its web series? Or fan loyalty will help Netflix soothe investors? Your take?

2 Likes

Long Term Comfortable Compounder
Portfolio Stock
Strong Pricing power and Moat

1 Like