Netflix, one of the world’s leading entertainment services companies based in California, is scheduled to report its Q1 2023 earnings on 18th April (Tuesday), after market close.
Fig.1: Reported Sales of Netflix versus Analyst Forecast. Source： CNN Business
In general, sales of Netflix remained consistent in 2022, with each quarter recording $7.9B-$8.0B. The total sales in the year was $31.6B, up 6.4% from the previous year. In Q1 2023, consensus estimates for sales hit $8.2B, up 3.8% from the previous quarter and the same period last year.
Fig 2：Netflix Paid Subscribers. Source： Statista
Netflix paid subscribers amassed to 230.75 million in the fourth quarter of 2022, up 3.43% from the previous quarter, and up 4% from the same period in 2021. In general, the number of Netflix subscribers has been riding on an upward trend, except during the first half of 2022 (shedding -1.2 million in total). In the previous quarter, the company stated seeing “comparable engagement” of subscribers in its newly launched ad-supported service. At the same time, it also stated that there is no significant number of people switching plans despite the cheaper ad-supported model. In addition, supported by the password-sharing crackdown, its impressive content and “paid sharing (an option for members to pay extra if they want to share the service with people they don’t live with)” being rolled out “more broadly” and a projected “sustained, positive annual free cash flow”, these factors may serve as tailwinds for the company in near future.
Fig.3: Reported EPS of Netflix versus Analyst Forecast. Source：CNN Business
On the contrary, EPS in Q4 2022 was unexpectedly down -96% from the previous quarter, to $0.12. The figure was way below the management’s forecast ($0.36), for which the underlying reason was pointed to “a loss related to euro-denominated debt”. Net income was $55 million, the lowest for any quarter since 2016. In the coming quarter, analysts forecast the company’s EPS shall reach $2.89, up more than 20 times from the previous quarter, but still below the average figure of Q1-Q3 2022.
Netflix remains one of people’s all time favourites among streaming services. According to a survey this year, Netflix is been among the top 3 in terms of customer satisfaction, content and user experience. This could explain why Netflix still has a place in a fiercely competitive environment. From a macroeconomic perspective, market participants are worried over recession risk later this year, with the banking crisis as the main catalyst. While Netflix has been historically proven recession-proof, it is also worth noting that the overall US consumer spending on streaming services has dropped by 25%.
Technical Analysis:
Technically, #Netflix (NFLX.s) remains pressured below the bottom line of the ascending channel, right above support $328.20 (FR 23.6%, extended from April’22 low to February’23 high). The bears need to break the said level and the dynamic support 100-day SMA, before extending losses further towards the next support zone $289.40 – $296.50. On the other hand, if support $328.20 remains intact, $367.90 shall serve as the nearest threshold, followed by the YTD high at $379.37.
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Larince Zhang
Market Analyst
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