It’s that time again; the 4Q22 earnings season is about to kick off and next week, Netflix (NASDAQ:NFLX) will deliver 2022’s final report. The one big change between this statement and all that preceded it, is that the Q4 print will be the first to include Netflix’s foray into ad-supported viewing. The company launched its Basic with Ads service for $6.99 a month in the U.S. on November 3rd and no doubt, investors will be keen to find out how the initiative is taking shape.
While Monness analyst Brian White is wary of the impact a weakening economy will have on Netflix’s business, while there are also “throngs of fierce competitors at its gates,” the analyst notes that Netflix “continues to drop captivating content on the platform.” The “biggest positive surprise” of the December quarter was the success of Wednesday (Season 1). Within its first 28 days on the platform, The Addams Family spin-off generated 1.196 billion hours of viewing time, propelling the new series to second spot on Netflix’s Most Popular TV (English) list, behind only Stranger Things (Season 4) that clocked 1.352 billion hours in its first 28 days.
As for the headline numbers, White expects Netflix will “at least meet” his 4Q22 revenue estimate of $7.911, billion amounting to a 3% year-over-year increase compared to the Street at $7.816 billion. The analyst projects EPS of $0.43, just below consensus at $0.44. “Our 4Q:22 sales forecast reflects flat quarter-over-quarter performance,” says the 5-star analyst, “weaker than the four-year average of up 4% for past December quarters.”
On the subs front, Netflix anticipates 4.5 million new paying additions (White expects 4.6 million – a 3% YoY uptick) although the company said this will be the last time it guides for this metric.
Summing up, while White believes Netflix “continues to release captivating content, and the stock’s valuation is unassuming,” he notes the industry “remains highly competitive,” whilst also believing the darkest days of the economic downturn are still to come.
As such, the analyst sticks with a Neutral rating without offering a fixed price target. (To watch White’s track record, click here)
Turning now to the rest of the Street, where the stock gets a Moderate Buy consensus rating, based on 15 Buys, 14 Holds and 3 Sells. At $308.81, the average target suggests shares will drop by 7% in the year ahead. (See Netflix stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
