Is Netflix Stock A Buy After Third-Quarter Reports
Internet television network Netflix (NFLX) has a commanding lead in the streaming video market but its growth has slowed. NFLX stock cratered in 2022 after the company reported two straight quarters of subscriber declines. However, after a corporate course correction, some people might be wondering: Is Netflix stock a buy right now?
Subscriber Growth Drives Netflix Story
Netflix stock has benefited from the cord-cutting trend as people quit traditional pay-TV services.
Over the last several years, Netflix has been laser-focused on growing its global subscriber base. It wants to build a competitive moat with scale. It has been investing heavily in local-language original content production worldwide. Netflix stock performance is linked to its net subscriber additions.
But Netflix stock tumbled 51% in 2022 as subscriber growth stalled. Growth has rebounded in 2023 thanks to the addition of a lower-cost, advertising-supported service as well as a crackdown on unpaid account sharing.
In the third quarter, Netflix added 8.76 million subscribers worldwide, vs. forecasts for 6.06 million. It ended the third quarter with 247.15 million subscribers worldwide.
Netflix also announced price increases for its ad-free service plans in the U.S., U.K. and France.
Netflix stock soared 16.1% on the first trading day after it posted third-quarter results late Oct. 18.
Netflix Stock Fundamental Analysis
In the September quarter, Netflix earned $3.73 a share on sales of $8.54 billion. Analysts had called for earnings of $3.49 a share on sales of $8.54 billion. On a year-over-year basis, Netflix earnings rose 20% while sales climbed 8%.
However, Netflix's financial guidance for the fourth quarter was a tad below Wall Street's targets.
For the current quarter, Netflix predicted earnings of $2.15 a share on sales of $8.69 billion. Analysts had been looking for earnings of $2.17 a share on sales of $8.78 billion in the fourth quarter. In the year-earlier period, Netflix earned 12 cents a share on sales of $7.85 billion.
After a humbling performance in 2022, Netflix says it is focused on profitability. It also is targeting increased revenue with a lower-priced, advertising-supported service tier. Plus, it is looking to monetize rampant account sharing on the service and turn freeloaders into paying customers.
The next major catalyst for Netflix stock could be the company's fourth-quarter earnings report, due in late January.
Netflix Content Draws Subscribers
Since it started its original content push, Netflix has launched quite a few hit shows. They include "Stranger Things," "Squid Game," "Wednesday," "Ozark" and "Bridgerton."
It also has premiered popular original movies such as "Bird Box," "Extraction," "Murder Mystery," "The Old Guard" and "Red Notice."
Recent buzzworthy shows on Netflix include TV series "One Piece," "FUBAR" and "The Fall of the House of Usher." Popular new original movies include action films "The Mother" and "Extraction 2" and comedy "You People."
Meanwhile, Netflix is facing competition from traditional media companies. Max from Warner Bros. Discovery (WBD) launched in May 2023. Paramount Global (PARA) debuted Paramount+ in March 2021. Comcast (CMCSA)-owned NBCUniversal launched Peacock in July 2020.
Other services include Amazon (AMZN) Prime Video, Apple's (AAPL) Apple TV+, Walt Disney's (DIS) Disney+, Hulu and more.
Netflix Enters Video Game Market
To create a stickier service, Netflix added mobile video games as part of its subscription offering in November 2021. Subscribers can play the games on Android and Apple iOS smartphones and tablets.
Since September 2021, Netflix has purchased four game studios. It bought Night School Studio, Next Games, Boss Fight Entertainment and Spry Fox. It also has opened two new game studios.
Netflix currently offers about 80 games to subscribers. They include action, arcade, puzzle, racing, sports and casino games.
Netflix Stock Technical Analysis
On May 18, Netflix stock broke out of a cup-with-handle base at a buy point of 349.80. It climbed as high as 485 on July 19 before pulling back. Netflix hit its record high of 700.99 in November 2021.
Price Momentum
NFLX is trading near the top of its 52-week range and above its 200-day simple moving average.
What does this mean?
Investors have been pushing the share price higher, and the stock still appears to have upward momentum. This is a positive sign for the stock's future value.
Subscriber Growth Drives Netflix Story
Netflix stock has benefited from the cord-cutting trend as people quit traditional pay-TV services.
Over the last several years, Netflix has been laser-focused on growing its global subscriber base. It wants to build a competitive moat with scale. It has been investing heavily in local-language original content production worldwide. Netflix stock performance is linked to its net subscriber additions.
But Netflix stock tumbled 51% in 2022 as subscriber growth stalled. Growth has rebounded in 2023 thanks to the addition of a lower-cost, advertising-supported service as well as a crackdown on unpaid account sharing.
In the third quarter, Netflix added 8.76 million subscribers worldwide, vs. forecasts for 6.06 million. It ended the third quarter with 247.15 million subscribers worldwide.
Netflix also announced price increases for its ad-free service plans in the U.S., U.K. and France.
Netflix stock soared 16.1% on the first trading day after it posted third-quarter results late Oct. 18.
Netflix Stock Fundamental Analysis
In the September quarter, Netflix earned $3.73 a share on sales of $8.54 billion. Analysts had called for earnings of $3.49 a share on sales of $8.54 billion. On a year-over-year basis, Netflix earnings rose 20% while sales climbed 8%.
However, Netflix's financial guidance for the fourth quarter was a tad below Wall Street's targets.
For the current quarter, Netflix predicted earnings of $2.15 a share on sales of $8.69 billion. Analysts had been looking for earnings of $2.17 a share on sales of $8.78 billion in the fourth quarter. In the year-earlier period, Netflix earned 12 cents a share on sales of $7.85 billion.
After a humbling performance in 2022, Netflix says it is focused on profitability. It also is targeting increased revenue with a lower-priced, advertising-supported service tier. Plus, it is looking to monetize rampant account sharing on the service and turn freeloaders into paying customers.
The next major catalyst for Netflix stock could be the company's fourth-quarter earnings report, due in late January.
Netflix Content Draws Subscribers
Since it started its original content push, Netflix has launched quite a few hit shows. They include "Stranger Things," "Squid Game," "Wednesday," "Ozark" and "Bridgerton."
It also has premiered popular original movies such as "Bird Box," "Extraction," "Murder Mystery," "The Old Guard" and "Red Notice."
Recent buzzworthy shows on Netflix include TV series "One Piece," "FUBAR" and "The Fall of the House of Usher." Popular new original movies include action films "The Mother" and "Extraction 2" and comedy "You People."
Meanwhile, Netflix is facing competition from traditional media companies. Max from Warner Bros. Discovery (WBD) launched in May 2023. Paramount Global (PARA) debuted Paramount+ in March 2021. Comcast (CMCSA)-owned NBCUniversal launched Peacock in July 2020.
Other services include Amazon (AMZN) Prime Video, Apple's (AAPL) Apple TV+, Walt Disney's (DIS) Disney+, Hulu and more.
Netflix Enters Video Game Market
To create a stickier service, Netflix added mobile video games as part of its subscription offering in November 2021. Subscribers can play the games on Android and Apple iOS smartphones and tablets.
Since September 2021, Netflix has purchased four game studios. It bought Night School Studio, Next Games, Boss Fight Entertainment and Spry Fox. It also has opened two new game studios.
Netflix currently offers about 80 games to subscribers. They include action, arcade, puzzle, racing, sports and casino games.
Netflix Stock Technical Analysis
On May 18, Netflix stock broke out of a cup-with-handle base at a buy point of 349.80. It climbed as high as 485 on July 19 before pulling back. Netflix hit its record high of 700.99 in November 2021.
Price Momentum
NFLX is trading near the top of its 52-week range and above its 200-day simple moving average.
What does this mean?
Investors have been pushing the share price higher, and the stock still appears to have upward momentum. This is a positive sign for the stock's future value.
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