When will Netflix release its quarterly results for the first quarter of 2023?
Streaming giant Netflix is set to release first-quarter results on Tuesday, April 18, after the US market close. A conference call will take place on the same day.
Consensus on Netflix’s quarterly results
Netflix is expected to post a 4% year-over-year revenue increase in the first quarter to $8.2 billion, in line with the company’s guidance. Operating margin is expected to be 20.1% and diluted earnings per share are expected to decline 19% year over year to $2.87.
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Netflix quarterly earnings preview
The past year has been one of the most difficult in the company’s history for Netflix. Subscriber growth slowed and the company lost its title as market leader after competitor Disney gained traction, while revenue grew at an all-time pace and profits fell for the first time in seven years. This caused the value of Netflix shares to more than halve!
However, the harsher conditions prompted Netflix to radically restructure its business with plans to revive revenue growth and boost profits by cracking down on password sharing and rolling out its much-vaunted ad-supported offering. This has led markets to believe that Netflix can get back on track in 2023, and the stock is up 15% year-to-date.
The stock is up 15% year-to-date. That’s putting pressure on Netflix to deliver in 2023 and show the new strategy is paying off, but it could prove another difficult entry as the company transitions from one model to another.
Netflix believes that more than 100 million homes around the world are abusing its service by using someone else’s password and has already begun encouraging users in some countries to create their own account or take advantage of the to use the new fee-based sharing function. Netflix has already suffered some setbacks as some users canceled their accounts and expanded its crackdown to other regions in the first quarter. That could slow subscriber growth in the short-term, but Netflix has said that this should bounce back as more users set up their own accounts or add to an existing one. Regardless, it’s all about improving its revenue growth, which fell to just 1.9% in its most recent quarter, the lowest on record. Netflix expects revenue growth to “accelerate in constant currencies” over the course of the year and for both operating margins and earnings to improve.
Netflix has stated that it expects “modest positive net paid growth” in the first quarter of 2023. Wall Street expects Netflix to add about 1.9 million new subscribers by the end of the period, with 236.36 million on the books.
It’s important that Netflix stops forecasting subscriber growth for each quarter and instead focuses more on revenue and other financial metrics. However, the company has previously predicted that the net addition to paid subscribers in the second quarter is likely to be greater than in the first quarter. Keep an eye out for comments here if that view has changed.
Investors are eagerly awaiting the first results of the new ad-supported service, which will be offered at a lower price and supplemented by advertising revenue. The service was launched in 12 countries with the help of Microsoft in November and Netflix said it was “pleased” with the initial results in its latest review, but acknowledged that “they still have a lot of work to do”.
While this has raised hopes that advertising can make a fresh comeback in 2023, it could be a slow and steady process that won’t really get going until late in the year. The company has previously said that it believes the service will eventually increase revenue and profits, but that “impact in 2023 will be modest as it will slowly build over time.” Spencer Neumann, Netflix’s chief financial officer, said in the latest earnings call that the company wouldn’t get into a business like advertising unless it believes it can account for at least 10% of its revenue. He hopes this will be much more as time goes on.
Netflix’s operating margin will slip to about 20% in the first quarter from 25% a year earlier, due to the timing of its content spending. For the full year, Netflix is hoping for a margin of 18% to 20% based on exchange rates, which are currently a significant drag.
The main task is to show that sales and profitability are on track to improve by 2023. That’s especially important given that Netflix prides itself on being a profitable company while competitors like Disney remain in the red and continue to burn cash. Netflix has said it aims to generate at least $3 billion in free cash flow in 2023, which would be nearly double 2022’s $1.6 billion.
What’s Next for NFLX Stock?
Netflix stock is up 15% since the start of 2023, though since February’s hit 10-month high, that trend has become harder to sustain.
The key level to watch for right now is $333, which is broadly in line with the 50-day moving average and which we saw before the stock’s collapse a year ago, and again as a resistance level in late December and early January showed up. In the last week alone, the stock has tested this level several times.
A dip below this level could see the stock slide towards $311 and a stronger decline could bring the crucial $250 level back into play.
On a positive reaction to the results, it could attempt a revisit towards the 2023 high and target $370. From there, it could attempt to scale above $396, which would take it back above pre-pandemic levels. Notably, the 43 analysts covering the stock have an average price target of $357.60 for Netflix, which suggests limited upside potential of less than 6% from current levels.
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