Reporter of the Economic Business: Wen Qiao Reporter of the Economic Business Business: Gao Han
On October 18, local time, streaming giant Netflix (NFLX, stock price of US$240.86, market value of US$107.112 billion) announced its third quarter financial report this year after the market closed on US stock . Data shows that Netflix not only reversed the continued decline of subscription users in the first half of the year, but also exceeded expectations of Wall Street . In addition, the company's quarterly revenue and profits were also better than market expectations. After the financial report of
was announced, Netflix, which closed down more than 1.7%, soared after the market, and the after-hours gained more than 15% at one point. As of press time, Netflix has risen by more than 14% after the disk.
Image source: Futu Niu Niu screenshot
According to Netflix's financial report released on Tuesday, the company's revenue in the third quarter of this year was US$7.926 billion, and increased by 5.9% year-on-year, higher than analysts' expectations of US$7.85 billion; the company's operating profit in the third quarter was US$1.53 billion, down 13% year-on-year, but better than analysts' expectations of US$1.26 billion; in addition, Netflix's diluted earnings per share (EPS) was US$3.1, down 2.8% year-on-year, but higher than analysts' expectations of US$2.12.
Netflix emphasized that the strengthening of the US dollar's exchange rate fluctuations have a great impact on performance, and said that if the foreign exchange impact is excluded, revenue in the third quarter will increase by 13% year-on-year, while revenue in the third quarter will decline completely due to the foreign exchange impact.
Netflix said that after a difficult first half of the year, the company is on the "road to accelerate growth" and attributed its success this quarter to multiple works including "Stranger Things 4", "Ogre Damer" and "Extreme Lawyer Yu Ying-jeong".
Under the leadership of "Stranger Things 4", Netflix achieved considerable user growth in the third quarter with high-quality content. According to the financial report, Netflix's global streaming paid subscription users increased by 2.41 million in the third quarter, far exceeding analysts' expectations of an increase of 1 million, while Netflix's previously expected increase was also 1 million. As of the third quarter, Netflix streaming paid users totaled 223.09 million, a year-on-year increase of 4.5%, higher than analysts' expectations of 221.7 million.
In the fourth quarter of 2021 and the first quarter of this year, Netflix's performance exploded for two consecutive quarters. Financial report data for the first quarter of this year showed that Netflix global paid subscription users decreased by 200,000 month-on-month, which is the first net loss since 2011, far inferior to the market and Netflix's own expectations of an increase of 2.5 million.
By the second quarter of this year, Netflix's global paid subscription users decreased by 970,000 month-on-month. Although the net loss of paid subscription users worldwide for two consecutive quarters, by the second quarter of this year, Netflix's global paid subscription users fell much lower than the company's previous warning of 2 million. The outstanding results of the third quarter announced that Netflix has reversed the trend of continued decline in subscription users from last year to this year.
In addition, Netflix is more optimistic about the growth prospects in the fourth quarter. The company expects a net increase of 4.5 million streaming paying users in the fourth quarter of this year, not only will it increase net user growth for two consecutive quarters, but it will also increase by 86.7% from the third quarter, 15.4% higher than the increase expected by analysts of 3.9 million.
Netflix said, "The expectations for net growth of paid users in the fourth quarter are based on the assumption that the quarter has seasonal growth as before and the content launched is strong, they can offset the negative impact of the weakness of macroeconomic ."
In addition, Netflix expects revenue in the fourth quarter to be US$7.78 billion, a year-on-year increase of 0.9%, lower than analysts' expectations of US$7.98 billion; Netflix expects EPS after dilution in the fourth quarter to be US$0.36, a year-on-year decrease of 72.9%, far lower than analysts' expectations of US$1.20. The company said the appreciation of the dollar was a huge headwind for the company, and the quarter-on-month decline in revenue in the fourth quarter was expected to be due to the continued strengthening of the dollar.
However, Netflix mentioned in a letter to shareholders that the company said it would stop predicting the increase in paid users, citing investors to focus on revenue rather than user growth. At the same time, in order to prevent early churn of subscription users, Netflix plans to launch an ad-compatible subscription package in November. "Early subscribers are helpful, but now we have such a wide range of price stratifications and different partnerships around the world, the economic impact of any particular subscriber can be quite different.”
In the eyes of many analysts on Wall Street, Netflix’s profitability is still worthy of favor. According to foreign media reports, UBS analyst John Hodulik raised Netflix’s target price by $52 to $250 per share. Citigroup’s analyst Jason Bazinet maintained the buy rating on the stock, and said Netflix’s upcoming subscription hierarchy with ads “may point to the substantial upward trend of free cash flow .” Evercore ISI analyst Mark Mahaney predicts that the advertising business will increase Netflix's revenue by 1 billion to 2 billion US dollars in 2024.
Disclaimer: The content and data of this article are for reference only and do not constitute investment advice. Verification is made before use. According to this operation, you can bear the risks at your own risk.
Daily Economic News
