Netflix Q3 Earnings: User Growth Should Show Recent Correction Was a Buying Opportunity | – France

  • Netflix’s third-quarter 2023 results will be announced on Wednesday after the market closes
  • The company has a policy that prohibits sharing accounts outside of the household.
  • Will this be reflected in earnings and turn the stock correction into a buying opportunity?

The global entertainment landscape has changed with the emergence of streaming platforms, eclipsing traditional media like television. Netflix (NASDAQ:) is the leader of this digital revolution. It allows the public to access an extensive library of films and series for a small subscription fee.

On Wednesday, expectations are high for Netflix’s third-quarter release, an important event given the platform’s recent policy change regarding password sharing.

The change, introduced in May this year, was aimed at curbing unauthorized account sharing and appears to be having the desired effect as user numbers continue to rise – a change that is expected to be reflected in the coming third quarter’s numbers.

However, it is interesting to note that despite strong user growth, Netflix stock is in a general correction phase, leading to speculation that the completion of this adjustment could result in results above current forecasts.

While we await results, all eyes are on Netflix’s forecast earnings per share, currently estimated at $3.48 on total revenue of $8.53 billion.

Forecasts were revised upwards 24 times and downwards only 3 times, reflecting a high level of anticipation on the part of the market.

Netflix’s upcoming earnings

Source: InvestingPro

Notably, we have seen a significant upward trend in earnings per share since October last year, which corresponded to an increase in the share price to around $485 at its peak in July.

The fair value increase target remains just over 36%, so there is the possibility of reaching new highs this year.

Fair value from Netflix

Fair value from Netflix

Source: InvestingPro

However, the chart does not provide any signals of a strong demand impulse that would trigger an upside technical formation, which may not occur until Thursday.

New user growth will accelerate

Netflix’s introduction of new account sharing rules last May sparked curiosity among many people about how these changes might impact new user development. The first few months have convincingly confirmed this decision, as the second quarter saw a significant increase of 5.9 million new subscribers, which corresponds to doubling the previous forecast.

Not surprisingly, this large influx has significantly increased revenues worldwide. Netflix executive Greg Peters struck an optimistic tone, emphasizing the likelihood that this positive trend will continue for several more quarters.

It’s worth noting that the ability to share accounts across a single household is still available, although at an additional cost of $7.99 per month in the US. Discussions about possible price adjustments for the ad-free offer are now gaining momentum in the near future.

Technical view: Netflix stock correction, a buying opportunity?

Starting in mid-July, Netflix’s stock price began a downward trend that coincided with a broader correction in the U.S. stock market. Currently, selling pressure is approaching the local support level in the price area around $350 per share. Currently, the market has not yet reacted significantly and any possible move could depend on the release of third quarter data, which will not be announced until after Wednesday’s meeting.

Netflix daily chart

Netflix daily chart

Source: InvestingPro

As the recovery scenario takes shape, the main focus of buyers will be to cross the key $400 per share mark, potentially paving the way for further valuation in the $480 region. However, if buyers fail to maintain the tested support, it is possible that they could move back towards the $300 level in the event of significant disappointment over the leaked data. However, this outcome currently seems less likely.


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Warning: The author does not own any of these stocks. This content, created solely for educational purposes, cannot be considered investment advice.