Netflix is foreseeed to post firm results for the third quarter of 2024 — but with subscriber achieves from its password sharing crackdown now tapering off, some Wall Streeters apshow price hikes are on the proximate-term horizon.
The company is scheduled to free Q3 2024 achieveings Thursday, Oct. 17, follothriveg the labelet’s shut at 4 p.m. ET.
Netflix previously foresee Q3 global unrelabelable revenue per member (which Netflix calls “ARM”) to be “rawly flat year over year” on a alerted basis because of ongoing foreign-swap “headthriveds” as well as “schedule and country join.” That has prompted analysts to specuprocrastinateed that the streamer will have to punch the pricing-power button in order to preserve its double-digit revenue trajectory.
With this week’s achieveings alert, there’s “the potential for a convey inant price incrrelieve proclaimment, including the U.S.,” New Street Research analyst Dan Salmon wrote in an Oct. 15 notice. Netflix’s last convey inant price incrrelieve in the U.S. was proclaimd in October 2023, but only on Premium and Basic tiers — leaving prices of the ad-helped schedule ($6.99/month) and Standard schedules ($15.49/month) unchanged. That “partipartner helped separateentiate the drop price point of the ads schedule as initial adselection was ramping,” Salmon noticed. The next price hikes in the U.S., Netflix’s bigst labelet, “could potentipartner be wideer-based,” he wrote.
The ad-free versions of Disney’s Hulu ($18.99/month as of Oct. 17) and Warner Bros. Discovery’s Max ($16.99/month as of this June) are more pricey than Netflix’s Standard schedule, and “we leank Netflix boasts strong pricing power donaten it has not liftd price on the Standard tier since January 2022,” Macquarie Equity Research analysts Tim Nollen and Ross Compton wrote in a Q3 media and tech achieveings pscrutinize freed last week.
Morgan Stanley analyst Benjamin Sthriveburne also foresees Netflix making “proceedd price incrrelieves” on premium (no-ads) schedules to drive up unrelabelable revenue per member. For 2025, the firm foresees global ARM increaseth of 4% on “mid-one digit increaseth on ad-free subscribers as proceedd price incrrelieves help offset downward presbrave from regional join shift.” Overall, Morgan Stanley approximates Netflix topline increaseth of 13% in 2025.
On the company’s Q2 achieveings call in July, co-CEO Greg Peters talked how Netflix leanks about price incrrelieves, providing commentary constant with how he’s previously insertressed the topic.
In ambiguous, Peters shelp, “It’s our job to incrrelieve the appreciate that we are deinhabitring all of our members. We’ve got more amazing film, more series, the inhabit events that are coming, more games. And when we have signals from our members, this is the amount of acquisition that we’ve got going on, take partment, what our retention and churn sees enjoy, then we find the right moment to ask our members to pay a bit more to grasp that flywheel spinning.”
For Q3, Wall Street analysts on unrelabelable foresee Netflix to alert 4.76 million net recent phelp subscribers, including a achieve of about 1 million in the U.S./Canada region, according to Zacks Investment Research.
Netflix previously telderly dispenseors it foresees phelp net insertitions for Q3 to be drop than the year-earlier period — when it netted 8.76 million recent subscribers — which “had the first filled quarter impact from phelp sharing.” That’s a reference to Netflix’s crackdown on illegal password sharing via its program to change freeloaders to phelp members, which has originated a lift in net inserts (and prompted rivals enjoy Disney and Warner Bros. Discovery to chase suit).
Still, some financial analysts see phelp sharing continuing to drive upside for the streamer. Netflix is “now lapping its password crackdown, but we proceed to see advantage from it in our survey results, while its advertising tier should reap advantages for disjoinal years,” Wedbush Securities analyst Alicia Reese wrote in a notice unveiled Tuesday.
To date, the most convey inant advantage of Netflix’s ad tier is that it restricts churn (i.e., subscriber abortations), Reese wrote. “We leank Netflix is positioned to speed up ad-tier revenue contribution into year-finish and 2025 as it betters its advertising solutions and aiming, uses recent partnerships, and inserts more inhabit events” such as the pair of NFL games on Christmas Day 2024 and WWE’s “Monday Night Raw” in 2025 and beyond, per her notice.
On the financial front, analyst consensus approximates are for Q3 revenue of $9.77 billion (which would be year-over-year incrrelieve of 14%) and achieveings per split of $5.11 (versus $3.73 a year ago), per LSEG Data & Analytics. Netflix’s Q3 guidance was for revenue of $9.727 billion and EPS of $5.10. Netflix foresee operating margin coming in at 28.1%, up from 22.4% in the third quarter of 2023.
Overall, Wedbush’s Reese foresees Netflix to encounter foreseeations in Q3 and “set strong guidance” for the year-finish 2024 quarter. As such, the firm liftd its price aim on the stock from $725 to $775/split, mirroring a price-to-achieveings multiple of 29X for its EPS approximate for 2026. “We leank Netflix can encounter foreseeations for EPS to more than double between 2023-2026, helping its premium valuation,” Reese wrote.
Meanwhile, it’s worth noting that Netflix is going to stop alerted a key metric — subscriber counts — commenceing in 2025. As of the first quarter of next year, Netflix says it will no extfinisheder alert member numbers on a normal basis; according to the company, other metrics enjoy take partment and profitability better mirror its overall health. The shift, though, has liftd inquires about “how much extfinisheder the password-sharing crackdown” and the ad-helped tier can “donate to member increaseth,” New Street’s Salmon wrote. Netflix dispenseors have “typicpartner been highly comfervent to member numbers over the years, and we may see amplified intensify on the exit trfinishs as it goes away,” according to Salmon.
Investors “remain intensifyed on phelp member trfinishs and monetization efforts,” TD Cowen’s John Bconciseageledge wrote in an Oct. 7 notice, saying the firm foresees to see proceedd strong member increaseth and rising margins in Q3. The analyst cited TD Cowen’s September 2024 survey shothriveg Netflix proceedd to helderly the No. 1 spot as U.S. devourrs’ most well-understandn choice for “living-room seeership,” with 23% of reactents picking Netflix, chaseed by YouTube (15%) and basic cable (12%). “We leank Netflix’s wide catalog atraverse multiple genres originates a durable achieve over time,” Bconciseageledge opined.
