While the main lists of Wall Street updates historical recordsinvestors are preparing to monitor and analyze the quarterly accounts of many technology stocks, starting from Netflix which has just closed one week full of volatility.
Tomorrow after the markets close, Netflix will publish his fourth quarter 2023 accounts and according to expectations the streaming big is seen close out a solid fourth quarterwith revenue and subscriber growth likely to reach consensus.
Meanwhile, while waiting for the accounts, the stock currently shows a timid increase of 0.7% to $486 per share. We see what are analysts’ expectations on Netflix and the levels to monitor on the stock for the next few weeks of trading.
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Netflix: the preview of the accounts
Looking at the consensus collected by Bloomberg we see how on average the analysts who follow the stock expect the streaming giant close the fourth quarter of 2023 with a earning per share (EPS) of $2.24 per share. This result would be lower than what was achieved in the previous quarter (Q3 2023, EPS at $3.7), but a marked increase compared to the 12 cents earned a year ago (Q4 of 2022).
As for the quarterly revenuesaccording to the average of analysts they should stand at 8.71 billion dollarsup from the 7.85 billion achieved in the fourth quarter of 2022.
Again taking the fourth quarter of 2023 as a reference, analysts estimate that the company will close the last quarter of the year with a gross operating margin (Ebitda) of over a billion dollars ($1.4 billion), also a marked increase compared to the 797 billion dollars achieved in the fourth quarter of 2022.
According to Bank of America analyst Jessica Reif Ehrlich, Netflix is poised to outperform as “It’s becoming increasingly clear that Netflix has won the “streaming wars”. BoA’s fourth-quarter strategist expects revenue of $8.79 billion (up from the Bloomberg consensus average) and operating profit of $1.22 billion (up from $1.16 billion). of last year).
In his forecasts the analyst cites the strong free cash flow (which should favor an increase in shareholder returns), but also the pdominant position globallyboth factors that will be catalysts for Netflix for 2024. For these reasons the analyst has maintained Netflix gave it a “buy” rating, but raised its target price from $525 to $585.
Preview for the whole of 2023
Regarding estimates for the full fiscal year 2023, analysts on average estimate that Netflix closes 2023 with earnings per share (EPS) of $12.24 per share, which would be an increasing figure compared to the $9.95 per share achieved in 2022.
For the whole of 2023analysts estimate revenues equal to 33.60 billion of dollars, a figure which is also significantly increasing compared to 31.61 billion achieved throughout 2022.
Subscribers are growing
One of the data most monitored by analysts and investors on Netflix concerns the number of subscribers and in this sense, Netflix’s objective has always been to continue to preserve the strong growth in the number of subscribers. In fact, let us remember that Netflix shares increased sharply after the company reported greater growth than analysts’ expectations regarding both profits but above all in the number of subscribers which, in the third quarter of 2023, increased by 8.76 million subscribers ( much more than the estimates stopped at 5.49 million new users)
Regarding subscribers, Netflix recently announced that it has 23 million active users on its platform and according to Bloomberg Intelligence (BI) estimates Netflix could end 2023 with around 24 million subscriberswith an increase in the number of subscribers in the 4Q which would be substantially in line (8.8 million subscribers added in the fourth quarter) with what was achieved in the already excellent 3Q.
In any case, according to BI estimates, in 2024 Netflix could reduce the growth trend we have seen so far in the number of subscribers and this is because “the company is trying to strike a better balance between subscriber and price increases, implying that average revenue per member (ARM) could increase by around 5-6% during the year in case of potential price increases in foreign markets”
The challenges in advertising
According to many analysts, “A big advantage Netflix enjoys over its traditional rivals is an advertising business that can only grow.”. Disney, Warner and Paramount are also offering ad-based plans, but the latter are nowhere near making up for the sharp decline in ads they’re experiencing on traditional TV.
But for Netflix, competition is also increasing in advertising, with Amazon for example likely to launch an ad-based subscription tier for its Prime Video service at the end of the month and, unlike Netflix, the new Prime offering supported by advertising will become the default for its viewers, while those who want to remain ad-free will have to opt for a new plan that costs an additional $3 per month.
Analysts optimistic about the stock
Even though Netflix has gained over 60% in 2023, and even though the company is on the eve of publishing its accounts, the analysts who follow the stock raise their price. In this sense, UBS raised its target price from $500 to $560, while confirming its buy rating.
Seaport Research in its target price review it mentions “the continuous progress of advertising registrations”The reason why raised its target to $541 from $482with the rating also remaining “buy” in this case
But not all analysts have increased their target price on the stock in recent weeks, for example, Citigroup analyst Jason Bazinet on January 9th downgraded Netflix bringing its rating to neutral.
In any case, overall analysts are optimistic about the stock, in fact, approximately 65% of analysts who follow the stock have a bullish view on the stock (in 38 analysts). 17 say they will keep the title in their portfolio (“hold”), while only 4 analysts have a bearish view on Netflix.
For what concern target priceon average analysts have positioned it at $506 per shareimplying a potential return of only 4% from the current price on Wall Street.
Netflix: the levels to monitor
As we see from the weekly time frame chart below, Netflix’s price has increased by around 40% since it released its strong third quarter results.
From a technical point of view, the recovery of Netflix continues and in case of continuation of purchases the upside breakout of the short-term resistance seen at $500 per share, could push the stock prices towards the next static resistance in the $520 area.
On the contrary, in the case of profit taking, the stability of the investment will need to be monitored main support area identified at $455 to action.