Netflix is set to post quarterly earnings on Thursday, with analysts expecting another strong set of results from the king of streaming.
An analyst consensus has forecast third quarter sales of around $9.8bn (£7.5bn) up 14 per cent year-on-year, and net income of $2.2bn (£1.7bn), with earnings per share expected at $5.07 (£3.88).
In July, Netflix predicted lower net subscriber additions than the second quarter’s eight million. The company plans to stop reporting subscriber numbers in 2025 and shift to a focus to revenue growth instead.
Netflix has enjoyed success with recent releases like Baby Reindeer, Bridgerton and Squid Game. Combined with upcoming major releases, this could allow for potential price increases on subscriptions.
Analysts have suggested that a modest price hike, potentially from $15 to $17, could be feasible without significant backlash, given the service’s popularity and necessity for many users. It comes as a crackdown on password sharing has also helped profit at Netflix’s UK division hit a record high.
Shares in the streaming giant have surged over 300 per cent from their 2022 lows, reaching record highs of $733.40 (£561.18). This has cemented Netflix’s leading position in the streaming market over competitors like Disney+ and Amazon Prime.
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But shares are trading at high earnings multiples of over 35x for 2024. “Those lofty multiples mean that expectations are high both for the third and fourth quarters of 2024 as well as Netflix’s long-term earnings growth potential,” said AJ Bell analysts.
It means performance must meet high expectations to avoid disappointing investors and leading to a punishment at market open – a fate that a number of US companies have suffered lately.
Most analysts hold a bullish outlook on Netflix and the stock’s recent performance has already exceeded target price estimates.
However, “there is a risk that the market could be disappointed if Netflix cannot deliver the goods for last quarter,” said Kathleen Brooks, research director at XTB. “Overall, we think that the company has a high chance of meeting expectations for Q3 earnings, but a negative shock could weigh heavily on the share price,” she added.
And, despite the share price, Netflix’s biggest challenge may be maintaining its lead on rivals, argued AJ Bell. “Management is clearly not going to rest on its laurels,” analysts said, “as it continues [to] develop gaming as another source of revenue to complement its powerful catalogue of prime film and series content.”
For the fourth quarter, projections include record sales of $10bn (£7.7bn), with net income expected to rise over 33 per cent year-on-year.