The entertainment behemoth, Netflix (NFLX), is gearing up to unveil its third-quarter 2024 financial results on Oct. 17.
Projections indicate a 14% revenue surge for the quarter, translating to 19% growth on an F/X neutral basis. This boost is credited to pricing modifications in Argentina and the devaluation of the local currency against the U.S. dollar.
The streaming giant foresees total revenues hitting $9.77 billion, a 13.9% climb compared to the previous year. Market consensus aligns with this estimate, standing at $9.77 billion.
Earnings per share are expected to reach $5.10, showcasing a 36.7% improvement from the prior year. The prevailing Zacks Consensus Estimate, at $5.07 per share, slightly lags the company’s projection and has remained stable over the last month.
The cornerstone of Netflix’s success continues to be its diverse content portfolio, characterized by substantial investments in localized and foreign-language content production and distribution.
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The Harmony of Earnings and Surprises
Netflix’s last quarter witnessed an earnings beat of 3.83%. Over the past four quarters, the company outperformed earnings expectations three times, with one instance of a slight shortfall at 6.15% below analysts’ predictions.
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A Mysterious Whisper of Earnings
Analysts predict another stellar earnings report for Netflix, supported by a positive Earnings ESP coupled with a favorable Zacks Rank of #1 (Strong Buy) or #2 (Buy). These factors significantly heighten the likelihood of an earnings beat, showcasing Netflix’s potential for market outperformance.
With an Earnings ESP of +1.37% and a current Zacks Rank #2, Netflix’s upward trajectory looks promising. The potential for growth further underscores investing in the streaming giant.
Undercurrents of Upcoming Results
Netflix anticipates a slight downturn in paid net additions compared to the previous year, largely due to the initial repercussions of paid sharing. Continuing its trend, the company foresees a relatively flat year-over-year global ARM in the third quarter. This stagnation arises from persisting F/X impediments and variances in geographical and plan distributions.
Strategic initiatives, such as the introduction of ad-supported affordable plans, have bolstered revenue streams and attracted a broader customer base. The crackdown on password-sharing has further monetized previously shared accounts, potentially elevating subscriber numbers and revenues.
Expansion into the gaming industry with popular titles like *Grand Theft Auto: The Trilogy* reflects Netflix’s commitment to a holistic entertainment experience, aimed at enhanced engagement and subscriber acquisition.
Despite these positive endeavors, Netflix faces stiff competition in the streaming domain, battling giants like Disney, HBO Max, Apple TV+, Amazon Prime Video, traditional TV, as well as platforms like TikTok and various gaming services.
Envisioning Growth in Q3
The Zacks Consensus Estimate places paid total streaming net membership additions at 4.75 million for the upcoming quarter. Revenue estimates for different regions indicate growth, with robust numbers projected across Asia-Pacific, Latin America, EMEA, and the United States and Canada.
The Pendulum of Price Performance and Valuation
While Netflix shares have surged by 48.5% year-to-date, outperforming sectoral rivals like Apple, Amazon, and Disney, the company’s forward 12-month sales multiple sits at 7.32X above its five-year median. Comparatively, the Broadcast Radio and Television industry boasts a lower forward earnings multiple of 2.84X, suggesting Netflix’s valuation may be slightly stretched.