Netflix (NFLX Stock) Share Price Soars as Subscriber Growth Rebounds

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After two successive quarters of negative subscriber growth, paid subscriptions rebounded in the third quarter to 2.41 million subscribers, well above expectations of just over 1 million, driving the stock price sharply higher. Netflix action after hours.

Total subscribers now hit a new high of 223.09 million, with Netflix saying it expects that number to rise by 4.5 million to 227.59 million in the fourth quarter. This seems optimistic given the rising cost of living, which shows few signs of slowing.

Third-quarter revenue also beat expectations at $7.93 billion, beating the forecast of $7.85 billion, while earnings reached $1.398 billion, or C$3.10, helped without any doubt by the finale of Stranger Things 4 which ended a little in suspense. .

Non-English programming also continued to generate strong revenues, with APAC and LATAM revenues both posting a 19% increase. APAC saw 1.4 million additions there, with Latin America adding 0.3 million.

That’s good news even ahead of the launch of their new tier of announcements which begins next month, but the streaming company’s Q4 guidance looks a little weak, making the rise in the price of somewhat perplexing action.

Yes, Netflix had a good third quarter, but the outlook isn’t good, if you take out the bullish subscriber growth numbers.

After-hours trading, companies like Disney, Paramount, Amazon and Discovery also saw gains following last night’s numbers.

Fourth quarter revenue is expected to reach $7.78 billion, while net profit is expected to fall to $163 million or C$0.36, while operating margin is expected to fall to 4.2% from 8 .2% a year ago. Does this mean that despite an expectation of a subscriber base increase of 4.5 million, Netflix expects revenue to decline?

Netflix seems to blame the strength of the US dollar for the headwinds when it comes to its fourth quarter numbers. From the tone of the shareholder letter, it’s clear that Netflix doesn’t expect a material contribution from the new advertising tier in the fourth quarter.

Netflix went on to say that the strong US dollar has cost it about $1 billion this year alone from a revenue perspective.

Operating margin for the full year remains on track to meet expectations of 19% to 20%.

As the company looks to 2023, Netflix said it will no longer release subscriber numbers and wants investors to focus on key metrics of revenue, profit and loss. operating, margin and net income.

Overall, yesterday’s Q3 numbers were a decent showing for Netflix and with the addition of the ad tier next month, the big question will be whether this model could cannibalize its more premium offering as some customers decrease.

Only time will tell, but with such weak indications, the bar is already quite low.

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