Streaming giant Netflix’s share price has enjoyed a six-month recovery from summer lows and the Silicon Valley titan will give investors a sense of whether it is deserved when it updates markets on Thursday.
Investors ditched the stock in numbers as the firm appeared to suggest it had reached a plateau on subscriber numbers in its more mature markets.
However, paid memberships rebounded faster than expected and investors also seem to have welcomed a move by the firm to offer a wider range of products to consumers – including a cut-price subscription which includes paid advertising slots.
“It’s clear that Netflix doesn’t expect a material contribution from the new ad tier in Q4, which started on November 3, and recent indications do suggest it has got off to a slow start,” said CMC Markets’ Chief Market Analyst Michael Hewson this weekend.
“On the other hand, the recent weakness of the US dollar should help on the revenue front. As the company looks ahead to 2023 Netflix has said it would no longer be publishing guidance of subscriber numbers, and that they wanted investors to focus on the key metrics of revenue, operating income, margin and net income,” he continued.
In an October third quarter update, Netflix said revenue, operating income and membership “slightly exceeded” internal forecasts.
“Our competitors are investing heavily to drive subscribers and engagement, but building a large,successful streaming business is hard – we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit,” the firm said in a letter to shareholders.
Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, echoed Hewson’s comments.
“With the market saturated in the US and Canada, the company is seeking-out growth in emerging economies, particularly in the Asia Pacific region, but these are areas which generate less revenue per membership. So, hanging onto existing customers is crucial and the company still has a fight on its hands as cost-of-living pressures mount on households in Europe and North America,” she said.