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After providing investors with a multitude of gains over the last several years, the music was shut off for Netflix (NFLX - Free Report) shares in 2022, sending them tumbling.
A slowdown in subscriber growth was the primary driving force behind the sell-off, with bears pushing bulls entirely out of the arena.
However, over the last three months, Netflix shares have crushed the S&P 500’s performance, as shown in the chart below.
Image Source: Zacks Investment Research
Shares got a big boost following the company’s Q3 report released yesterday.
It raises a valid question, should investors take another look at Netflix shares now that buyers have returned? Let’s take a deeper dive into the company’s recent quarterly print.
Netflix Q3
It was a much better-than-expected quarter for Netflix – revenue, operating income, and membership exceeded the company’s initial forecast, undoubtedly a major highlight.
Netflix reported quarterly earnings of $3.10 per share, handily beating the Zacks Consensus EPS Estimate of $2.11 by a double-digit 47%.
The company generated $7.9 billion in revenue throughout the quarter, edging out the Zacks Consensus Sales Estimate by 1%.
Following back-to-back quarters of subscriber losses, Netflix provided investors with much-needed positive news; NFLX added roughly 2.4 million net new paid subscribers, more than double the Zacks Consensus Estimate of 1.1 million, bringing the overall subscriber count to approximately 223.1 million.
Further, the company’s lower-priced ad-supported plan is slated to be deployed in 12 countries in November, a massive step for the company.
Netflix has been pushing the idea of an ad-supported tier for some time now, looking to add more ways to generate revenue.
Netflix stated, “The reaction from advertisers so far has been extremely positive and we believe that more choice, especially for more price conscious consumers, will translate into meaningful incremental revenue and operating profit over time. That said, it’s still very early days and, since we’re keeping our existing plans ad-free, it will take us time to build up our membership base and the associated ad revenue.”
NFLX previously announced that Microsoft (MSFT - Free Report) will be its technology and sales partner for its advertising venture.
Additionally, Netflix has been undergoing a multi-year evolution of its content model; the company has been transforming its service from licensed second-run content to mostly Netflix originals.
The evolution of its content model has proven successful; the streaming giant’s Q3 content portfolio was strong, with Stranger Things Season 4 generating roughly 1.4 billion hours viewed, NFLX’s biggest season of an English language series in its history.
Netflix’s limited series, Monster: The Jeffrey Dahmer Story, was also a significant hit, with it now being the second-largest English series in the company’s history with 824 million hours watched.
Clearly, it was a strong quarter for the company, with two of its Q3 releases becoming their first and second most-watched English series of all time.
The company also provided an optimistic view for its Q4 – it forecasts net new paid subscribers adds of a strong 4.5 million, and average revenue per membership (ARM) is expected to grow 6% Y/Y.
Big Competition
One of Netflix’s biggest competitors is undoubtedly Disney (DIS - Free Report) with its Disney+ service.
In fact, the Disney+ subscriber base actually overtook Netflix’s earlier in the year, with 221.1 million subscribers reported vs. Netflix’s roughly 220.7 million.
With Netflix now reporting a subscriber base of 223.1 million in Q3, it’s taken back the throne.
NFLX holding the title remains valid until Disney reports its Q4 results on November 11th.
Disney+ has been growing at an unbelievable pace; the service added 14.4 million subscribers in its latest quarter.
Further, DIS also plans to release an ad-supported tier for Disney+, slated to roll out on December 8th of this year, roughly a month after Netflix’s proposed initial rollout.
Analysts have been bearish for the upcoming quarter, with four estimate revisions hitting the tape over the last several months. Still, the Zacks Consensus EPS Estimate of $0.60 for DIS reflects a stellar 62% Y/Y uptick in earnings.
Image Source: Zacks Investment Research
With Netflix posting a better-than-expected quarter, it seems valid to question Disney’s upcoming quarterly results. The success that Disney+ has displayed has been remarkable, quickly catching up to Netflix.
With seemingly no signs of subscriber slowdown, Disney+ can easily take back the top streaming position if it posts a strong quarter.
This back-and-forth war between the two streaming titans will play out right before our eyes.
Bottom Line
Netflix (NFLX - Free Report) shares have been the victim of a deep sell-off in 2022 thanks to a subscriber slowdown being a thorn in the company’s side.
However, buyers have stepped up visibly for NFLX shares over the last three months, driving shares for a stellar run. Following the company’s better-than-expected Q3, shares skyrocketed in after-hours trading.
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Is It Time to Resume Watching Netflix Shares?
After providing investors with a multitude of gains over the last several years, the music was shut off for Netflix (NFLX - Free Report) shares in 2022, sending them tumbling.
A slowdown in subscriber growth was the primary driving force behind the sell-off, with bears pushing bulls entirely out of the arena.
However, over the last three months, Netflix shares have crushed the S&P 500’s performance, as shown in the chart below.
Image Source: Zacks Investment Research
Shares got a big boost following the company’s Q3 report released yesterday.
It raises a valid question, should investors take another look at Netflix shares now that buyers have returned? Let’s take a deeper dive into the company’s recent quarterly print.
Netflix Q3
It was a much better-than-expected quarter for Netflix – revenue, operating income, and membership exceeded the company’s initial forecast, undoubtedly a major highlight.
Netflix reported quarterly earnings of $3.10 per share, handily beating the Zacks Consensus EPS Estimate of $2.11 by a double-digit 47%.
The company generated $7.9 billion in revenue throughout the quarter, edging out the Zacks Consensus Sales Estimate by 1%.
Following back-to-back quarters of subscriber losses, Netflix provided investors with much-needed positive news; NFLX added roughly 2.4 million net new paid subscribers, more than double the Zacks Consensus Estimate of 1.1 million, bringing the overall subscriber count to approximately 223.1 million.
Further, the company’s lower-priced ad-supported plan is slated to be deployed in 12 countries in November, a massive step for the company.
Netflix has been pushing the idea of an ad-supported tier for some time now, looking to add more ways to generate revenue.
Netflix stated, “The reaction from advertisers so far has been extremely positive and we believe that more choice, especially for more price conscious consumers, will translate into meaningful incremental revenue and operating profit over time. That said, it’s still very early days and, since we’re keeping our existing plans ad-free, it will take us time to build up our membership base and the associated ad revenue.”
NFLX previously announced that Microsoft (MSFT - Free Report) will be its technology and sales partner for its advertising venture.
Additionally, Netflix has been undergoing a multi-year evolution of its content model; the company has been transforming its service from licensed second-run content to mostly Netflix originals.
The evolution of its content model has proven successful; the streaming giant’s Q3 content portfolio was strong, with Stranger Things Season 4 generating roughly 1.4 billion hours viewed, NFLX’s biggest season of an English language series in its history.
Netflix’s limited series, Monster: The Jeffrey Dahmer Story, was also a significant hit, with it now being the second-largest English series in the company’s history with 824 million hours watched.
Clearly, it was a strong quarter for the company, with two of its Q3 releases becoming their first and second most-watched English series of all time.
The company also provided an optimistic view for its Q4 – it forecasts net new paid subscribers adds of a strong 4.5 million, and average revenue per membership (ARM) is expected to grow 6% Y/Y.
Big Competition
One of Netflix’s biggest competitors is undoubtedly Disney (DIS - Free Report) with its Disney+ service.
In fact, the Disney+ subscriber base actually overtook Netflix’s earlier in the year, with 221.1 million subscribers reported vs. Netflix’s roughly 220.7 million.
With Netflix now reporting a subscriber base of 223.1 million in Q3, it’s taken back the throne.
NFLX holding the title remains valid until Disney reports its Q4 results on November 11th.
Disney+ has been growing at an unbelievable pace; the service added 14.4 million subscribers in its latest quarter.
Further, DIS also plans to release an ad-supported tier for Disney+, slated to roll out on December 8th of this year, roughly a month after Netflix’s proposed initial rollout.
Analysts have been bearish for the upcoming quarter, with four estimate revisions hitting the tape over the last several months. Still, the Zacks Consensus EPS Estimate of $0.60 for DIS reflects a stellar 62% Y/Y uptick in earnings.
Image Source: Zacks Investment Research
With Netflix posting a better-than-expected quarter, it seems valid to question Disney’s upcoming quarterly results. The success that Disney+ has displayed has been remarkable, quickly catching up to Netflix.
With seemingly no signs of subscriber slowdown, Disney+ can easily take back the top streaming position if it posts a strong quarter.
This back-and-forth war between the two streaming titans will play out right before our eyes.
Bottom Line
Netflix (NFLX - Free Report) shares have been the victim of a deep sell-off in 2022 thanks to a subscriber slowdown being a thorn in the company’s side.
However, buyers have stepped up visibly for NFLX shares over the last three months, driving shares for a stellar run. Following the company’s better-than-expected Q3, shares skyrocketed in after-hours trading.