What To Expect From Netflix’s Q1 Earnings?

NFLX: Netflix logo

Netflix (NASDAQ:NFLX) is slated to report its Q1 2023 results on April 18th.  We estimate that Netflix’s revenue will come in at about $8.2 billion for the quarter, marginally ahead of the consensus estimate of about $8.17 billion. This would mark year-over-year growth of roughly 4%, although it would be down from a growth rate of close to 10% in the same quarter last year. We estimate that earnings will stand at about $2.90 per share, compared to a consensus of $2.86 per share. So what are some of the trends that are likely to drive Netflix results? See our interactive dashboard analysis on Netflix Earnings Preview for more details on how Netflix’s revenues and earnings are likely to trend for the quarter.

Netflix has stopped providing guidance on subscriber additions – a sign that its years of big growth are clearly cooling.  However, the company’s focus has shifted more toward better monetization, and there are some key trends that we will be watching when the company reports earnings. This will be the first full quarter since the launch of the company’s ad-supported plan called “Basic with Ads.” Over its Q4 2022 conference call, Netflix indicated that the plan was helping it to reach out to a new set of more price-sensitive customers, without seeing customers switch to the ad-supported plan from other subscription tiers. Netflix is also looking to boost its monetization of account sharing. While the company introduced paid sharing of accounts in some Latin American countries last year, it expanded these tests to Canada, New Zealand, Portugal, and Spain in February. We will be looking for updates on the same.

Now, Netflix margins could also face some pressure over the quarter due to the timing of the company’s content spending and potentially due to some foreign currency impacts. Netflix’s rollout of the ad-supported tier could also have a temporary impact on margins. For perspective, Netflix sees operating margins of 20%, compared to about 25% in the year-ago quarter.

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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. At the current market price of about $339 per share, Netflix trades at about 30x forward earnings which is not very attractive considering the company’s slowing subscriber growth and concerns about an economic downturn. 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.

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MTD [1]
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[1] Month-to-date and year-to-date as of 4/8/2023
[2] Cumulative total returns since the end of 2016

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