Yahoo Finanza What’s in Store for Netflix Earnings This Week?
Netflix is among them this Wednesday the 19th, after market close, and analyst expectations are fairly positive after strong share growth this year.
Netflix’s restored momentum in subscriber growth is one of the major causes behind its successful performance lately, employing a twofold strategy to boost growth by enforcing password sharing restrictions and launching a new ad-supported service. These approaches should increase user acquisition and retention, which will grow the customer base further over time.
In the meantime, two major unions, the Writers Guild of America, and now the Screen Actors Guild, and the American Federation of Television and Radio Artists (SAG- AFTRA), have gone on strike, further crippling an industry still reeling from the aftermath of the Covid pandemic. What effect will this have on the company’s future profitability?
Recap Last Quarter
For the third straight quarter, Netflix’s subscriber growth surged ahead of analysts’ expectations at the start of the year, adding to evidence that the video streaming service has regained its pace following a shocking decline in user demand that spurred an organizational reorganization. The 1.75 million additional Netflix customers added between January and March exceeded most expectations.
Compared to the same period last year, Netflix’s first quarter revenue of $1.3 billion, or $2.88 per share, was down 18%. The per share amount was, however, somewhat higher than expected. Revenue increased 4% from the prior year to $8.16 billion, slightly under analyst expectations.
How Will the Current Strikes Impact the Streaming Giant?
The Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA), which is the union representing approximately 160,000 performers, called a strike last week in response to an ongoing labor dispute with the Alliance of Motion Picture and Television Producers (AMPTP), which includes Netflix. In the background, the Writers Guild of America has been on strike since early May over similar issues.
The two main topics that the striking writers and actors are most concerned about are compensation and the development of AI. Actors are becoming increasingly uneasy about the use of AI, which is displacing live performances with computer-generated analogues and taking the place of ‘extras’ among other things. Ultimately, the employment opportunities in the performing industry are threatened by this new direction, which also raises concerns about actors’ future professional prospects.
Some fear the strike could last months and be extremely costly for the industry as actors walk out on commitments from current productions to marketing campaigns and events.
Netflix, with its international productions and new projects already ready to go, is expected to weather the strikes reasonably well, as it has a diverse pull of entertainment at its disposal. For how long this confidence will last is anyone’s guess. If the strike is long enough, the company may struggle along with their competition for a time until new agreements are in place.
Expectations for Q2 2023
It’s anticipated that adding an ad-supported tier will have further propelled membership growth in the second quarter and will be ongoing. Customers who were price-conscious and on the fence about subscribing before are likely to change their minds now after seeing the new option, and revenue from advertisements is also projected to grow.
Netflix revealed in May that its ad-supported tier has nearly 5 million global monthly active subscribers already. The company also reported that 25% of new signups in the countries where it is accessible choose the ad tier, and that the number of ad tier customers has more than doubled since the beginning of the year.
Also, as the new crackdown on password sharing quickly reduces unauthorized access, it is expected to have an effect on paid subscriptions too. More than 100 million users, according to the company’s estimation, had previously given their log-in information to friends and family who lived outside of their homes. The company believes around half will opt to open their own accounts over time.
According to Zacks Investment Research, the consensus EPS forecast for the quarter is $2.82, based on the projections of eleven analysts. The reported EPS for the same quarter last year was $3.20, representing a decrease of 11.88% year-over-year.
Investors expect earnings to grow over the course of the remainder of the year, with the strategies outlined above in addition to cost-cutting measures already announced earlier in the year. Netflix shares are currently trading at their highest level since February 2022 at around $456, up more than 54% since January 2023.
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This article was originally posted on FX Empire
