Netflix FY24Q1 Earnings Preview: Slower Subscriber Growth, Yet Sharp Rise in EPS

Netflix's share has risen 27% year-to-date, and its new quarterly earnings report could be another catalyst. The company is scheduled to release its earnings for the first quarter of 2024 after the market closes on April 18, 2024. Netflix has forecasted Q1 revenue to be $9.24 billion, marking a 13.2% increase YoY.

S&P Global data similarly reflects optimistic expectations for Netflix. Revenue is forecasted to reach $9.28 billion, a 13.7% increase YoY. EPS is expected to be $4.52, a 56.9% increase YoY.

Analysts have consistently given Netflix buy ratings. According to the analyst ratings feature on moomoo, the average consensus target price is $623.06, with the highest target price at $765, representing a 23% increase from the current price.

In the Q4 2023 earnings report, Netflix added 13.1 million new subscribers, easily surpassing Wall Street's expectations of 8 to 9 million, surprising investors. Netflix expects customer growth to slow down in the first quarter of 2024 due to a slowdown in seasonal trends and the pull-forward effect of strong growth in the fourth quarter, with Wall Street predicting an increase of 4.31 million in customer numbers.

The company has been cracking down on password sharing. In spring 2023, Netflix launched a $8/month paid sharing option in the US for account sharing outside households. The ad-supported tier is also becoming increasingly popular, enabling the company to attract more price-sensitive customers. In January, Netflix reported that the plan had a total of 23 million users globally. Moreover, the ad-supported plan is expected to generate more revenue per user than the company's standard plans, as the incremental advertising revenue is sufficient to offset the discounts provided by Netflix on the ad tier.

Last October, in the US, Netflix raised the price of its Basic plan by $2 – going from $9.99 to $11.99. Premium subscribers saw a bigger price hike of $3 – going from $19.99 to $22.99. Netflix's pricing strategy appears to be adjusting on a global scale, with subsequent price adjustments in certain parts of Europe and Singapore as well. While the price increases will undoubtedly contribute to revenue growth, they may also prompt users to switch to more affordable alternatives.

Wedbush indicates that as the connected TV advertising market continues to grow, streaming services from Netflix and Amazon.com are expected to see accelerated growth, with projections reaching $44 billion by 2028. Netflix's cost per thousand impressions (CPM) and ad load rate are steady at $40 and four ads per hour, respectively, and are expected to remain stable through 2024. Analysts observe that Netflix's advertising efforts are gaining momentum through strategic partnerships that leverage consumer data to improve measurement and increase ROI, with a notable collaboration involving Amazon's connected-TV platform.

Although Netflix has rightfully earned the title of King of Streaming, the competition in the streaming industry from companies like Disney and Warner Brothers remains fierce. Outside the streaming industry, Netflix also faces intense competition from linear television, YouTube, and TikTok.

In January, WWE and Netflix announced a long-term partnership that will bring WWE's flagship weekly program – Raw – to the world's leading entertainment service. The deal is valued at $5 billion. At the same time, Netflix has clarified that it intends to expand its live sports content, with reports suggesting an interest in the NBA. If Netflix wants to secure the NBA's domestic broadcasting rights in the US, a viable option would be to exclusively stream the in-season tournaments, which currently have a cumulative selling price of about $1.55 billion per season. Such sports contracts would significantly increase Netflix's costs and could impact its profitability.