Netflix Q4 Subscriber Numbers Were Strong, What’s Next For The Stock?

-5.56%
Downside
361
Market
341
Trefis
NFLX: Netflix logo
NFLX
Netflix

Netflix (NASDAQ:NFLX) posted a relatively strong set of Q4 2022 results, with paid subscriber additions coming in at 7.7 million, well ahead of the company’s guidance of 4.5 million additions. Much like most other U.S. multinational companies, revenues were impacted by the strong U.S. dollar (the dollar index is up 7% over the last year), with revenue growing 1.9% versus last year to $7.85 billion, although it would have been about 10% in constant currency terms. Net income fell to $55 million, due to the unrealized loss from foreign-exchange re-measurement on the company’s euro-denominated debt. For the quarter ending March 2023, Netflix is projecting revenue of $8.2 billion and earnings of $2.82 a share. Going forward, Netflix indicated that it would stop providing guidance on subscriber additions – a sign that its years of big growth are clearly cooling.

The company is now focusing on boosting monetization. Netflix began to roll out its advertising-supported plan in early November. Thus far, the company says that it is seeing few customers switch to the ad-supported plan from other subscription tiers and this makes sense, given that the purpose of the plan was to help the company reach out to a new set of more price-sensitive customers. While Netflix expects the impact of advertising on its financials to be limited in 2023, it is an important space to play given that branded TV advertising is estimated to be a $180 billion market in the 190 countries that Netflix operates. Netflix is also looking to better monetize account sharing, expanding the paid password-sharing option that it tested in parts of Latin America more broadly to new geographies from late Q1 2023. Under the offering, subscribers should have the option to pay an extra fee if they want to share their Netflix account with people they do not live with. Although the company could see some amount of initial subscriber churn due to the rollout, the move should help to eventually boost revenue.

We were quite bullish on Netflix stock when it fell to five-year lows around mid-2022. However, the stock has recovered considerably since then, almost doubling over the last six months. At the current market price of about $340 per share, Netflix trades at about 30x forward earnings which is not very attractive considering multiple headwinds, including the potential U.S. recession which could hurt consumer spending. We currently remain neutral on Netflix stock, with a price estimate of $340 per share, which is roughly in line with the current market price.  See our analysis Netflix ValuationExpensive or Cheap for more details on what’s driving our price estimate for Netflix. Also, check out the analysis of Netflix Revenue for more details on how Netflix revenues are trending.

Relevant Articles
  1. What To Expect From Netflix’s Q4 Results?
  2. With Ad Business Off To A Slow Start, What’s Next For Netflix Stock?
  3. Will Netflix’s Advertising Strategy Move The Needle For The Stock?
  4. Company Of The Day: Netflix
  5. What To Expect From Netflix’s Q3 Results?
  6. Why Netflix Stock Has Held Up Through The Recent Sell Off

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 NFLX Return 16% 16% 177%
 S&P 500 Return 3% 3% 77%
 Trefis Multi-Strategy Portfolio 8% 8% 239%

[1] Month-to-date and year-to-date as of 1/21/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates