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The streaming giant Netflix (NFLX - Free Report) reported fourth-quarter 2023 earnings of $2.11 per share, which missed the Zacks Consensus Estimate by 4.09%. The figure surged from 12 cents reported in the year-ago quarter. Revenues of $8.83 billion increased 3.4% year over year and beat the consensus mark by 1.33%.
Shares jumped double digits on Wednesday, climbing over 10% as Netflix reported strong subscriber additions which topped 13 million. There was a rise of 1% in average revenue per subscription. Notably, Netflix gained 7.66 million paid subscribers in the year-ago quarter.
Aa strong content portfolio in the reported quarter led to this gain. The company credited gains to the strength of its intellectual property, including Squid Game: The Challenge, a reality show based on its most-watched TV series, new original series, such as All the Light We Cannot See, feature films like Zack Snyder's Rebel Moon: A Child of Fire and non-English-language programming, including the third season of Lupin from France.
The Zacks Rank #2 (Buy) Netflix also cited strong demand for licensed titles, such as Young Sheldon, besides strong viewership for the final season of the long-running royal drama The Crown and David Fincher's original film, The Killer.
Netflix has an upbeat VGM score of B. All these upbeat factors put Netflix-heavy ETFs like MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Next Gen Media and Gaming ETF (GGME - Free Report) , REX FANG & Innovation Equity Premium Income ETF (FEPI - Free Report) and First Trust S-Network Streaming and Gaming ETF (BNGE - Free Report) .
Behind the Headline Numbers
The company attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general. In October 2023, Netflix raised the price of its premium ad-free plan to $22.99 while its one-stream basic plan rose to $11.99.
On the ads front, ad-tier memberships increased 70% quarter over quarter. The ads plan now accounts for 40% of all Netflix sign-ups in the markets it has offered. Earlier this month, NFLX stated that the ad tier has surpassed 23 million monthly active users, which increased from 8 million from its November update.
ARM increased 1% year over year, both on a reported basis and a foreign-exchange neutral basis in the fourth quarter. The company had guided “roughly flat year-over-year” ARM due to limited price increases over the last 18 months, as well as price reductions in some countries at the beginning of 2023, which were partially offset by price increases in the United States, United Kingdom and France in the fourth quarter of 2023. At the end of the fourth quarter, Netflix had 260.28 million paid subscribers globally, up 12.8% year over year.
What Lies Ahead?
The recent deal with WWE marks the streaming service’s first serious foray into live events as it seeks to fend off competition from rivals, such as Amazon and Disney. It marks the first time in more than three decades that Raw will not be broadcast live on a traditional TV channel. Raw will air each week on Netflix in the United States, United Kingdom, Canada and Latin America, with additional countries to be added over time.
Netflix will also host other WWE shows and specials outside the United States, including SmackDown and Royal Rumble, as well as documentaries and series from next year.
Guidance
For the first quarter of 2024, Netflix forecasts revenues to increase 16% on a F/X neutral basis. The company has projected earnings of $4.49 per share, suggesting growth of 55.9% year over year or 12% on a foreign-exchange neutral basis. The Zacks Consensus Estimate for the same was $4 per share, lower than the company’s expectation.
Total revenues are anticipated to be $9.24 billion, suggesting growth of 13.2% year over year or 12% on a foreign-exchange neutral basis. The consensus mark for revenues was $9.28 billion, higher than the company’s expectation.
For 2024, the company expects healthy double digit revenue growth on a F/X neutral basis, driven by a rise in membership as well as improvement in F/X neutral ARM. Netflix is increasing full-year 2024 operating margin forecast from 22%-23% to 24% (based on F/X rates as of Jan 1, 2024). This reflects the weakening of the U.S. dollar compared with other currencies since October as well as stronger-than-forecasted fourth-quarter 2023 performance.
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Netflix Shares Surge Post Earnings: ETFs in Focus
The streaming giant Netflix (NFLX - Free Report) reported fourth-quarter 2023 earnings of $2.11 per share, which missed the Zacks Consensus Estimate by 4.09%. The figure surged from 12 cents reported in the year-ago quarter. Revenues of $8.83 billion increased 3.4% year over year and beat the consensus mark by 1.33%.
Shares jumped double digits on Wednesday, climbing over 10% as Netflix reported strong subscriber additions which topped 13 million. There was a rise of 1% in average revenue per subscription. Notably, Netflix gained 7.66 million paid subscribers in the year-ago quarter.
Aa strong content portfolio in the reported quarter led to this gain. The company credited gains to the strength of its intellectual property, including Squid Game: The Challenge, a reality show based on its most-watched TV series, new original series, such as All the Light We Cannot See, feature films like Zack Snyder's Rebel Moon: A Child of Fire and non-English-language programming, including the third season of Lupin from France.
The Zacks Rank #2 (Buy) Netflix also cited strong demand for licensed titles, such as Young Sheldon, besides strong viewership for the final season of the long-running royal drama The Crown and David Fincher's original film, The Killer.
Netflix has an upbeat VGM score of B. All these upbeat factors put Netflix-heavy ETFs like MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Next Gen Media and Gaming ETF (GGME - Free Report) , REX FANG & Innovation Equity Premium Income ETF (FEPI - Free Report) and First Trust S-Network Streaming and Gaming ETF (BNGE - Free Report) .
Behind the Headline Numbers
The company attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general. In October 2023, Netflix raised the price of its premium ad-free plan to $22.99 while its one-stream basic plan rose to $11.99.
On the ads front, ad-tier memberships increased 70% quarter over quarter. The ads plan now accounts for 40% of all Netflix sign-ups in the markets it has offered. Earlier this month, NFLX stated that the ad tier has surpassed 23 million monthly active users, which increased from 8 million from its November update.
ARM increased 1% year over year, both on a reported basis and a foreign-exchange neutral basis in the fourth quarter. The company had guided “roughly flat year-over-year” ARM due to limited price increases over the last 18 months, as well as price reductions in some countries at the beginning of 2023, which were partially offset by price increases in the United States, United Kingdom and France in the fourth quarter of 2023. At the end of the fourth quarter, Netflix had 260.28 million paid subscribers globally, up 12.8% year over year.
What Lies Ahead?
The recent deal with WWE marks the streaming service’s first serious foray into live events as it seeks to fend off competition from rivals, such as Amazon and Disney. It marks the first time in more than three decades that Raw will not be broadcast live on a traditional TV channel. Raw will air each week on Netflix in the United States, United Kingdom, Canada and Latin America, with additional countries to be added over time.
Netflix will also host other WWE shows and specials outside the United States, including SmackDown and Royal Rumble, as well as documentaries and series from next year.
Guidance
For the first quarter of 2024, Netflix forecasts revenues to increase 16% on a F/X neutral basis. The company has projected earnings of $4.49 per share, suggesting growth of 55.9% year over year or 12% on a foreign-exchange neutral basis. The Zacks Consensus Estimate for the same was $4 per share, lower than the company’s expectation.
Total revenues are anticipated to be $9.24 billion, suggesting growth of 13.2% year over year or 12% on a foreign-exchange neutral basis. The consensus mark for revenues was $9.28 billion, higher than the company’s expectation.
For 2024, the company expects healthy double digit revenue growth on a F/X neutral basis, driven by a rise in membership as well as improvement in F/X neutral ARM. Netflix is increasing full-year 2024 operating margin forecast from 22%-23% to 24% (based on F/X rates as of Jan 1, 2024). This reflects the weakening of the U.S. dollar compared with other currencies since October as well as stronger-than-forecasted fourth-quarter 2023 performance.