[Financial Summary] Netflix picks up net increase of over 8 million members next fiscal year after falling close to 7% outside of concerns

However, since sales forecasts for the third quarter fell short of expectations, and growth in the number of subscribers slowed down compared to the previous quarter, stock pricesA temporary decline of close to 7% due to overtime tradingI did it.

Netflix's stock price is close to the all-time high recorded in November 2021, and expectations for Wall Street's current results are quite high. After that, NetflixAssuming that there is still room for growth in the Indian market, stock prices stopped falling and began to rise due to overtime trading。

The net increase in the number of members was double the market forecast, but it decreased quarterly
Of the second quarterThe number of members increased 16.5% from the same period last year to approximately 0.2 billion78 millionAs a result, it exceeded analysts' expectations of about 0.2 billion74 million people. The number of members on the advertised plan was a net increase of 8.05 million people this quarter compared to the market forecast of 4.87 million people.

According to some analysts, the year-on-year increase in net membership growth for advertised plans was overwhelming in North America and Latin America, but growth from the previous quarter slowed. The overall net increase in membership was 5.9 million higher than the same period last year, but decreased compared to the previous quarter.

The fact that Netflix will stop reporting data on the number of new subscribers and ARPU (average revenue generated per user) indicators after 2025Concerned about long-term subscriber growthI was holding him.

However, according to the company, this is to shift emphasis from an increase in the number of subscribers to sales and operating profit margins, which are the main financial indicators, and user engagement (time spent on the platform), which is an indicator of customer satisfaction.

Even though the outlook was revised upward, third-quarter earnings and full-year free cash flow forecasts were sluggish
Netflix predicts that sales for the full fiscal year 2024 will grow 15% from 14% compared to the previous year, but this is the sales growth rate compared to 15% growth from 13% previously forecastLower range limit revised upwardIn line with that, the market still anticipates sales growth of around 15%.

Wall Street also predicts that the average annual revenue growth rate will remain 13% for the next 3 years, and there is a possibility that Netflix EPS will increase 53% from $12.03 last year to $18.41 this year, and increase further 21% to $22.29 in 2025.

At the same time, analysts expect that it will not change at the level of 25%. The company anticipates an operating profit margin of 26% for the full year. NetflixAnnual free cash flow (FCF) of approximately 6 billion dollars, which is lower than analysts' forecast of 6.59 billion dollarsIt is said that it will remain unchanged at.

Note that EPS for the third quarter is expected to exceed market expectations of 0.474 billion dollars at 5.10 dollars, but sales for the third quarter are 9.73 billion dollars, which is significantly lower than analysts' expectations of 9.83 billion dollars.

How do you view Wall Street?
Many analysts raised Netflix's target share price prior to the second quarter report.

Bank of AmericaRaise target share price from $700 to $740It “reflects the continued momentum of the underlying business,” and was bullish on “world-class brands, the world's leading user base, and leadership position in innovation,” and it was predicted that advertising revenue “will increase drastically (despite fierce competition)” in 2025 and 2026.

Similarly, Morgan StanleyBullish on the magnitude of economies of scale in the streaming media fieldThus, in mature markets such as North America, Netflix's television broadcast time is still less than 10%, and the company's advantage of creating free cash flow and a strong balance sheet contrasts with competitors that have drastically reduced spending, etc., so it is stated that there are still huge opportunities.

What should I focus on now?
However, Citigroup has maintained a cautious “neutral” rating and has also lowered its target share price to $660.

Now that a year and a half has passed, Morgan StanleyThe potential to generate significant revenue from ads has yet to be proven, and more needs to be done to scale up adsIf there is one, they are calling attention.

In addition to new subscribers and ad revenue trends, the market is also paying attention to the two “Netflix Houses” that will open in 2025 in Pennsylvania and Texas. This “Netflix House” provides an immersive experience including food and experiential products related to “blockbuster IPs.”

Also, some analysts have pointed out that the price increase for ad-free packages is to get more users to use the advertising package, and that the cancellation of the cheapest ad-free package in England and Canada will also lead to further promoting the development of advertising.

Furthermore,Netflix also focuses on sports and gamesI'll do it. We are planning to broadcast the Christmas game of pro football NFL, one of the four major sports in the United States. There is a possibility that investment in such games, live streaming, and sports-related content will result in an increase in earnings, but there is also an analysis that it will have an impact on profit margins. There is a possibility that the combination of inexpensive advertised packages, which are being actively promoted, and increases in digital marketing fees will put pressure on profit margins.

Source: Bloomberg, Moomoo, Nihon Keizai Shimbun
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts