Netflix Stock Analysis: Audience Growth and Record Revenue

Amidst intense competition in the streaming industry, Netflix Inc. (NASDAQ: NFLX) continues to expand its subscriber base, creating favourable conditions for revenue and profit growth. This trend is evident in the Q3 2023 report, released on 18 October 2023, which led to a more than 17% increase in Netflix Inc. stock prices.

In this article, we will explore the American streaming service, examine quarterly statistics, analyse the key drivers behind its financial performance growth, and delve into the forecasts provided by the company's leadership and Wall Street analysts for the current quarter.

Netflix Q3 2023 report

As of Q3 2023, Netflix Inc.'s revenue for July-September showed a 7.77% increase compared to the same period in 2022, reaching 8.54 billion USD. The net profit surged 19.96% to 1.68 billion USD, equivalent to 3.73 USD per share. Experts surveyed by FactSet had anticipated quarterly revenue of 8.54 billion USD and earnings per share of 3.49 USD.

During Q3 2023, Netflix Inc. executed a share repurchase programme of approximately 2.5 billion USD and expanded its authorisation for share repurchases to 10 billion USD.

The number of paid streaming service subscribers increased by 8.76 million, reaching 247.15 million, surpassing the consensus forecast of approximately 5.9 million. The company's leadership attributes this growth to efforts to combat data sharing of user accounts and the introduction of a new ad-supported pricing tier.

Quarterly revenue and paid audience distribution by region

• UCAN (USA and Canada): 3.7 billion USD in revenue, with an increase of 1.75 million paid subscribers
• EMEA (Europe, Middle East, and Africa): 2.7 billion USD in revenue, gaining 3.95 million paid subscribers
• LATAM (Latin America): 1.14 billion USD in revenue, with 1.2 million additional paid subscribers
• APAC (Asia-Pacific region): 0.95 billion USD in revenue, featuring an increase of 1.9 million paid subscribers

Netflix management’s forecast for Q4 2023

Netflix Inc. foresees that revenue for Q4 2023 will reach 8.69 billion USD, with earnings per share amounting to 2.15 USD. Experts project revenue to be around 8.77 billion USD, respectively.

The company has revised its 2023 operating margin forecast from 18% to 20% and anticipates an increase to 22-23% in 2024, barring significant fluctuations in currency exchange rates.

Netflix’s stock live price chart

Developing Netflix’s business

Subscription management

On 3 November 2022, Netflix launched a new subscription plan that includes advertising support, priced at 6.99 USD monthly. As of the end of Q3 2023, the number of subscribers to this plan had increased by 70%.

Moreover, in Q4 2023, the company plans to raise subscription plan prices for the US, UK, and France by a minimum of 20%. The ad-supported subscription and the standard plan will maintain their prices at 6.99 USD and 15.49 USD per month, respectively.

This creates a favourable environment for an expansion in ad-supported subscription numbers, which could have a positive impact on cooperation with advertisers and ad revenue.

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Addressing password sharing

In May 2023, Netflix Inc. announced its campaign to counter the sharing of data from paid accounts among users. This addresses situations where multiple households were using a single streaming platform account. According to the Q3 2023 performance, this effort has yielded positive results.

Netflix House

On 12 October 2023, the corporation introduced the Netflix House project. This innovative concept involves the creation of themed establishments where fans can fully immerse themselves in the world of their favourite shows. Netflix House will encompass retail, dining, and live performances. The company plans to open the first two venues in the US in 2025 and then extend the project to more locations.

Expert opinions on Netflix

After the publication of Netflix Inc.'s Q3 2023 report, experts began upgrading the ratings of the company's stocks. On 19 October 2023, analysts at Morgan Stanley (NYSE: MS) revised their rating from Hold to Strong Buy and increased the target price from 430 USD to 475 USD. The rationale behind this change is the acceleration of Netflix Inc.'s business, effective measures against password sharing, and a stronger market position than competitors.

According to Defense World, experts from DZ Bank and Truist Securities raised their ratings on Netflix Inc.'s securities from Hold to Buy and set a target price of 465 USD. Analysts at KeyBanc Capital Markets assigned a Strong Buy rating to the streaming service's shares with a target price of 510 USD.

Netflix stock analysis

In the first half of October 2023, just a few days before the release of the Q3 report, Netflix Inc. shares broke through the upward trend line and exited the ascending channel. This development is likely an indicator of the conclusion of the upward trend.

Following the publication of financial statistics for July-September 2023, stock prices attempted to return to the ascending channel. However, a pre-existing descending trendline acted as a resistance point to further price growth. As of the time of drafting this article on 30 October 2023, the quotes rebounded from the descending trendline, potentially indicating weakness among the bullish investors and the possibility of further price declines.

The optimistic forecast from Netflix Inc.'s management for Q4 2023 and the high ratings from experts suggest the potential for further appreciation in the company's stock prices. Technical analysis can confirm this forecast only if the descending trendline is breached. In such a case, the shares will likely target the resistance level of around 450 USD. If they surpass this level, it may be possible to advance towards the maximum of 485 USD. However, if the shares continue to trade within the descending channel, the probability of further price declines is likely to persist.

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Summary

Netflix Inc. reported an 8% increase in revenue in Q3 2023 and a 20% increase in net profit. The company expects revenue to reach 8.69 billion USD in Q4, with earnings per share expected to reach 2.15 USD. Given the financial reports and forecasts, it is fair to presume that any potential decrease in stock prices, as indicated by technical analysis, will most likely be short-lived.

If there is a breakthrough in the resistance level, the scenario of declining stock prices is likely to become irrelevant. In this case, fundamental and technical analyses, along with expert forecasts, may align, which could have a positive impact on the value of the streaming service's stock.

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