Last week, the season for publishing third-quarter results among American companies began. This coming Thursday, Netflix – a streaming giant whose shares have gained an impressive 344% over the last two years – will present their results. Analysts predict a solid 14.4% growth in revenue for the third quarter year-on-year, yet investors have particularly high expectations for the companies this season.
On Friday, Netflix shares reached a historical high. They were valued at 725 dollars, which represents a growth of over 97% in the last 12 months. Since April 2022, they have increased by 344%. As the third-quarter report approaches, the majority of investors are optimistic, counting on the company’s ongoing dominance in the global streaming market. However, the high evaluation may prompt some investors to realize profits if the results do not meet expectations. To justify the high valuations of many companies, it must be remembered that expectations towards companies’ results for this quarter are particularly strong.
Analysts predict that Netflix’s revenue will increase by 14.4% year-on-year, reaching 9.77 billion dollars, and earnings per share will increase by 37%, reaching a level of 5.11 dollars. The company is focusing more and more on live broadcasts and has announced several new deals of this kind. At Christmas, Netflix plans to broadcast two NFL games in the USA, and next year, “Raw” – a popular wrestling-themed show – will hit the platform. A 10-year contract for this service is worth 5 billion dollars. These actions may act as another growth impulse for the company.
The key indicator for investors remains the number of subscribers. It is expected to increase by about 4 million, reaching 286 million. However, from 2025, Netflix plans to stop publishing subscriber data, so investors will have to focus on other indicators, such as the level of debt and gross margin. These will help to assess profitability and overall business efficiency. Netflix has ramped up investment to broaden its offering and stand out from competitors such as Disney+ and Warner Bros. In 2024, the budget for content production will be 17 billion dollars, and the cost of each NFL match is around 75 million dollars.
Netflix shares are currently highly valued – the 12-month forward P/E (price/earnings) ratio is 31.36. The USA remains the company’s largest market, accounting for 41% of revenue. The macroeconomic environment in the United States is favorable – the economy is heading for a “soft landing”, inflation is falling, and the job market is stronger than expected. Moreover, further interest rate cuts by the FED are possible, which could increase consumers’ ability to spend on streaming services, supporting further growth of Netflix.
Paweł Majtkowski, eToro analyst in Poland
Source: https://managerplus.pl/akcje-netflixa-wzrosly-o-344-proc-od-dolka-w-2022-roku-92892
