Netflix Earnings News and Forecast: NFLX recoups most of initial loss with buyback promise
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UPGRADE- Netflix stock recouped most of initial sell-off.
- Charging higher monthly fees for sharing passwords will enter US market.
- The company ended the quarter with more than $2 billion of excess cash and said it would continue buybacks.
- Subscriber figures appear to be back on growth path.
Netflix (NFLX) stock is trading down 1.1% in Wednesday's premarket following the streaming giant's first quarter results that initially saw a sell-off late Tuesday of more than 12%. Management's promise to continue buying back stock seems to have done the trick though. Subscriber numbers were also better than expected, but a miss on revenue triggered some traders, and overall slow revenue growth led to the stock's initial plunge.
Netflix earnings news: Password sharing fee comes to US
Netflix's GAAP earnings per share (EPS) of $2.88 beat Wall Street consensus by a penny, but it amounted to an 18.4% slide from the year ago period. High costs and the adverse impact of a more valued US Dollar hit the YoY earnings performance.
Revenue of $8.16 billion missed its mark by $20 million, and sales grew an anemic 3.7% YoY. This was an improvement over the fourth quarter's 1.9% growth rate but well below the 9.8% rate in Q1 2022. Furthermore, Netflix's paid subscriber base of 232.5 million added just 1.75 million net new subscribers in the quarter, far below Q4's 7.66 million net subscriber adds.
Netflix Q1 2023 press release
The four countries that Netflix rolled out its paid password sharing program in over the past six months appears to have paid off though. Netflix will be rolling out its paid program worldwide, including the United States, during the second quarter, which should lead to an overall increase in subscriptions and revenue. Co-CEO Greg Peters, who handled the earnings call without the help of founder and former CEO Reed Hastings for the first time, said the results of adding the password sharing fee was similar to the past results of price increases.
"You see an initial cancel reaction," Peters said, "and then we build out of that both in terms of membership and revenue as borrowers sign up for their own Netflix accounts, and existing members purchase that extra member facility for folks that they want to share with."
CFO Spence Neumann said Netflix's lower-priced advertising tier was seeing positive results on a per subscriber revenue basis. "In the US, it's actually been higher than our standard plan," Neumann said. "It's kind of a win-win, because it's a lower-priced option for our members [...] and it's incremental revenue, incremental profits to the business."
With about $7.8 billion in cash on the balance sheet, management did not specify how much but said share repurchases should continue all year long.
Netflix stock forecast
Netflix stock will likely fall into a consolidation pattern for the moment. That is because shares are sitting right on top of support at $330 to $333. That support shelf stems from 2021. The Moving Average Convergence Divergence (MACD) indicator has only recently crossed over bearishly, and the 8-day moving average is charging lower in an attempt to intersect with its 30-day counterpart. If the market does continue to buy, then bulls do not have far to push. The $350 and $370 resistance levels only amount to another 10% to 15% increase.
NFLX daily chart
- Netflix stock recouped most of initial sell-off.
- Charging higher monthly fees for sharing passwords will enter US market.
- The company ended the quarter with more than $2 billion of excess cash and said it would continue buybacks.
- Subscriber figures appear to be back on growth path.
Netflix (NFLX) stock is trading down 1.1% in Wednesday's premarket following the streaming giant's first quarter results that initially saw a sell-off late Tuesday of more than 12%. Management's promise to continue buying back stock seems to have done the trick though. Subscriber numbers were also better than expected, but a miss on revenue triggered some traders, and overall slow revenue growth led to the stock's initial plunge.
Netflix earnings news: Password sharing fee comes to US
Netflix's GAAP earnings per share (EPS) of $2.88 beat Wall Street consensus by a penny, but it amounted to an 18.4% slide from the year ago period. High costs and the adverse impact of a more valued US Dollar hit the YoY earnings performance.
Revenue of $8.16 billion missed its mark by $20 million, and sales grew an anemic 3.7% YoY. This was an improvement over the fourth quarter's 1.9% growth rate but well below the 9.8% rate in Q1 2022. Furthermore, Netflix's paid subscriber base of 232.5 million added just 1.75 million net new subscribers in the quarter, far below Q4's 7.66 million net subscriber adds.
Netflix Q1 2023 press release
The four countries that Netflix rolled out its paid password sharing program in over the past six months appears to have paid off though. Netflix will be rolling out its paid program worldwide, including the United States, during the second quarter, which should lead to an overall increase in subscriptions and revenue. Co-CEO Greg Peters, who handled the earnings call without the help of founder and former CEO Reed Hastings for the first time, said the results of adding the password sharing fee was similar to the past results of price increases.
"You see an initial cancel reaction," Peters said, "and then we build out of that both in terms of membership and revenue as borrowers sign up for their own Netflix accounts, and existing members purchase that extra member facility for folks that they want to share with."
CFO Spence Neumann said Netflix's lower-priced advertising tier was seeing positive results on a per subscriber revenue basis. "In the US, it's actually been higher than our standard plan," Neumann said. "It's kind of a win-win, because it's a lower-priced option for our members [...] and it's incremental revenue, incremental profits to the business."
With about $7.8 billion in cash on the balance sheet, management did not specify how much but said share repurchases should continue all year long.
Netflix stock forecast
Netflix stock will likely fall into a consolidation pattern for the moment. That is because shares are sitting right on top of support at $330 to $333. That support shelf stems from 2021. The Moving Average Convergence Divergence (MACD) indicator has only recently crossed over bearishly, and the 8-day moving average is charging lower in an attempt to intersect with its 30-day counterpart. If the market does continue to buy, then bulls do not have far to push. The $350 and $370 resistance levels only amount to another 10% to 15% increase.
NFLX daily chart
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