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Netflix Reports Unlikely To Impress Investors And Affect Netflix Stock Price Target

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Netflix Reports Unlikely To Impress Investors And Affect Netflix Stock Price Target

Netflix partially returned investor interest in the Netflix stock price target as part of last week’s earnings release.

After dropping 60% since the beginning of the year (by the time the previous report was published), the company’s stock has significantly outperformed broad indices.

As of January 13, Netflix stock was up 36 percent, while the S&P 500 index was up 7 percent over the same period and the NASDAQ 100 was up just 3 percent.

Such positive momentum was due to a return of investor faith in the streaming business model and the success of certain series of the service, such as “Wednesday.”

In anticipation of another report, let’s take a look at what to expect and whether everything is so positive in the company’s business right now. Perhaps the GOOG stock price target may be more interesting at the moment.

Can the company beat expectations so that we can see a positive Netflix stock price target?

Note that Q4 2022 is seasonally strong for Netflix: in past years, peak inflows have occurred during this period. If the forecast of 4.5 million subscribers comes true, it would be the worst fourth quarter since 2014.

Such a conservative forecast gives the company a chance to beat it, but it’s not that simple.

On the one hand, the content release schedule has been very busy, which should help exceed the consensus. On the other hand, the end-of-quarter content fell short of expectations.

The unexpected success of Wednesday (1.28 billion hours of viewing in the first 28 days after release), which became the service’s second most-watched series after season 4 of Very Strange Things, was partially offset by the complete failure of the The Witcher prequel (average audience rating on Rotten Tomatoes – 13%).

Streaming data in the U.S. also does not provide confidence in exceeding the consensus. Although the share of TV viewing hours in the U.S. is increasing, YouTube has taken and confidently holds the first position among the services, and since September has overtaken Netflix.

Netflix stock price history: what does the consensus forecast expect from Q1 2023?

What will happen to Netflix stock price history? For Q1 2023, the consensus forecast is for revenue of $8.1 billion, implying 3.4% YoY growth.

Net subscriber inflows are expected to be 3.5 million. Operating income is $1.7 billion, implying a 21% margin. Free cash flow is projected at $890 million (11% margin).

Given the content release schedule, the forecast for subscribers looks optimistic. For comparison, here’s data from similar quarters in previous years.

In the first quarter of 2022 there was an outflow of 200 million, but there was an effect of the termination of the service in Russia.

Adjusted for this, the inflow was 500 million. A year earlier, in 2021, it was at the level of 4 million, but then the pandemic and low competition had an impact.

As before, inflows will largely determine the content release schedule.

After a tight Q4 2022 release schedule, Q1 2023 traditional releases look scarce. The March schedule is still far from known, but according to preliminary data, it will be less crowded.

According to the company’s website, about 60 original series and movies are expected to be released by the end of March, which is significantly less than it was in Q4 (154 projects). The number of potential hits is also lower.

Another key point will be the launch of the subscription advertising plan, which took place in November 2022.

However, don’t expect an increased influx of users just yet. Rather, it is a means to retain current users. That’s why we recommend looking at GOOG after hours stock price, an equally interesting tool for investors.

Historical data suggests that management’s forecast for the next quarter after the reporting quarter is, on average, 0.3 million worse than consensus expectations.

This is likely to happen again. A positive surprise could be an influx to the ad plan. That said, there have only been four quarters since the beginning of 2019 when the forecast beat expectations.

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Results

Overall, we should clearly not expect significant positivity from the reporting. Actual results may be slightly better than consensus expectations, but management’s outlook for Q1 2023 will probably disappoint investors.

Given the company’s high valuation multiples relative to its peers, poor reporting could lead to a sell-off in the company’s stock. It is worth avoiding buying securities before it is published.

Netflix’s long-term growth points remain, but right now they are clearly not the most attractive levels even for long-term investors. It is better to wait for more interesting numbers and a busy content release schedule on letizo.com.

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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