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1 Stock to Get Excited About Again

1 Stock to Get Excited About Again

Posted On November 7, 2022 2:42 pm
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After two quarters of subscriber declines and slowing growth, streaming major Netflix, Inc. (NFLX) bounced back in some fashion as it added more subscribers than analysts estimated in the third quarter. NFLX reported a net gain of 2.41 million subscribers, which was considerably higher than the average 1.1 million additions expected by analysts.

Amid rising competition from other streaming platforms, NFLX reported a subscribers decline of roughly 200,000 in the first quarter and 970,000 in the second quarter, leading its shares to nosedive.

The higher-than-expected subscriber addition in the third quarter surprised the market. NFLX shares jumped after the company’s results were announced on October 18, 2022.

NFLX Chart
Source: MarketClub

NFLX has had a torrid time this year, with its stock declining 55.3% in price year-to-date to close the last trading session at $269.06. However, its shares have gained 12.6% over the past month.

The company comfortably beat Wall Street revenue and earnings estimates in the last reported quarter. Its revenue and EPS beat the estimates by 1.1% and 43.1%, respectively.

After a poor first half where The Walt Disney Company (DIS) overtook NFLX as the market leader, the company took up massive changes, such as introducing ad-supported streaming and cracking down on shared accounts. The company is also considering a cloud-gaming service.

In its letter to its shareholders, the company said that it expects 4.5 million new subscribers in the fourth quarter and expects its revenue to grow to $7.78 billion. Its subscriber guidance is higher than analysts’ estimates of 4 million.

In the shareholder letter, NFLX executives said, “After a challenging first half, we believe we’re on a path to reaccelerate growth.” The company debuted its advertising-supported tier in the United States, dubbed “Basic with Ads,” for $6.99 a month, which is below Disney’s ad-based price point of $7.99. It is expected to be launched in eleven other countries by November 10.

Moreover, as it looks to crack down on account sharing, the company, in its letter, said, “landed on a thoughtful approach to monetize account sharing, and we’ll begin rolling this out more broadly starting in early 2023.”

Here’s what could influence NFLX’s performance in the upcoming months:

Mixed Financials

NFLX’s revenues increased 5.9% year-over-year to $7.92 billion for the third quarter ended September 30, 2022. Its net income declined 3.5% year-over-year to $1.39 billion. The company’s EPS came in at $3.10, representing a decline of 2.8% year-over-year.

Its net cash provided by operating activities increased 576% year-over-year to $556.81 million. In addition…

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