Company / Analytics

Analytics, 10 March 2023

Netflix Stock News And Forecast

Many tech and online companies have been facing a lot of challenges in the market while still trying to keep their stock price’s growth rates up.

Some companies are making moves to remain, profitable tech giants with Apple, Alphabet, and Amazon all seeing a strong stock performance in the first few months of 2023, with Apple up 18%, Amazon up 11%, and Alphabet up 8%. Despite concerns about high inflation, the stocks are trading attractively from a price-to-earnings valuation standpoint. At the same time, Meta’s stocks rose by nearly 1% following reports of a new round of job cuts that could affect thousands of employees, marking the company’s latest effort to cut costs after a major round of layoffs in November. Despite the potential negative implications of layoffs, recent tech layoffs have led to stock increases at multiple companies.

Netflix earnings release and analysis

Netflix is gearing up for its next earnings release and analysts are expecting the company to report EPS of about $2.80, which is a 20.4% drop from the prior-year quarter. However, quarterly revenue is expected to increase by 3.92% to $8.18 billion from the year-ago period. Looking at the full year, the Zacks Consensus Estimates suggest that analysts are expecting earnings of $11.18 per share and revenue of $34.15 billion, which would mark changes of +12.36% and +8.02%, respectively, from last year.

Recent changes in analyst estimates indicate a positive outlook for Netflix’s business, and investors can use the Zacks Rank to capitalize on this. The Zacks Rank system ranges from Strong Buy to Strong Sell and has an impressive track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Netflix currently has a Zacks Rank of #3 (Hold), and the Zacks Consensus EPS estimate has moved 0.45% higher within the past month.

In terms of valuation, Netflix is currently trading at a Forward P/E ratio of 28.19, which is higher than the industry average of 14.03. The company also has a PEG ratio of 1.46, which takes the expected earnings growth rate into account. The industry average PEG ratio is 1.46 as of yesterday’s close. The Broadcast Radio and Television industry, to which Netflix belongs, currently has a Zacks Industry Rank of 219, which puts it in the bottom 14% of all 250+ industries.

Crack Down on Password Sharing

Loop Capital expects Netflix’s plan to crack down on password sharing to result in a net benefit for the company. A survey of more than 500 Netflix users in the U.S. showed that the change would increase revenue by 3%, which is smaller than the per-user revenue gain of 27%, offset partially by the fact that paying subscriptions would decrease by 19%. Netflix is expected to have data from countries where it has already implemented this policy before instituting it in the U.S., which is its largest market at 40% of global revenue.

Loop Capital’s managing director, Alan Gould, expects Netflix to implement the password-sharing clampdown in the U.S. sometime in the middle of 2023, which initially might create higher churn of subscribers and lower engagement, but should move closer to historical levels by the second half of the year. While having a hold rating on the stock, Gould expects 2023 and 2024 earnings per share to come in 6% to 7% higher than previously estimated. Gould also raised his price target by $10 as a result of the data to $330, which implies the stock could gain 5.8% from where it closed Monday over the next year.

Netflix’s performance in the stock market this year has been modest, with a gain of 5.71% after losing 51.1% in 2022.

The stock was trading at 311.79 U.S. dollars, as of the time of writing. In the past five days, the stock has shot up by 0.27% while in the past six months, the stock price has shot up by 33.49%.

Investor’s Note on Netflix stock forecast

In conclusion, while Netflix is expected to report a drop in EPS in the next earnings release, the company’s quarterly revenue is expected to increase. Recent analyst estimates suggest a positive outlook for the business, and the Zacks Rank system provides a simple, actionable rating for investors. Netflix’s valuation is currently higher than the industry average, and the company’s plan to crack down on password sharing could result in a net benefit for the company, according to Loop Capital. While Loop Capital has a hold rating on the stock, the managing director expects earnings per share to come in higher than previously estimated and raised the price target as a result of the data.

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