Oct 17, 2023

Netflix is preparing for its third-quarter earnings release after a recent stock slowdown.

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Netflix shares reached a high above $475 in July but have since slumped to $355, making this an important earnings release.

Netflix’s crackdown on password-sharing likely boosted subscribers by about 6 million in the third quarter, and the company is expected to set the stage for price increases when it reports on Wednesday.

Netflix has resisted following rivals like Walt Disney in hiking ad-free prices this year and instead embarked on a password-sharing crackdown to cut the reported 100 million viewers who use its service without subscribing.

“Netflix now closely resembles a utility in many markets,” said analysts at Bernstein. “The challenge of being labelled a utility is how a maturing company continues to find growth.”

Some analysts think the company may hike prices after Hollywood actors’ strikes. The Writers Guild of America last week approved a new contract with the large studios. Netflix has been able to avoid the effects of the strike due to its larger international presence and waiting list of content.

After a slower start for its ad-based plan last year, analysts said they expect Netflix will raise prices for its ad-free options to bring in more subscribers.

So far, viewers have been using the ad-free version after the password-sharing fight. Revenue in the third quarter is expected to rise 7.7% to $8.54 billion, the fastest growth in five quarters, thanks to strong content.

“Using these tactics, Netflix will likely double its ad-supported viewership next year,” said analyst Ross Benes. Investors will be watching the earnings and the management’s plans, which will determine whether the stock can bounce back from the recent slump. Analysts have been concerned about the pace of the company’s advertising tiers.

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