California-based Netflix, Inc. (NASDAQ: NFLX) offers a subscription-based streaming service through which its members can watch TV shows, documentaries and movies on any device connected to the Internet. The video library features the company’s own productions as well as videos from distribution deals.
At the end of last year, Netflix had over 221.8 million subscribers across the world, including 75.2 million in the U.S. and Canada, 74 million in Europe, the Middle East and Africa, 39.9 million in Latin America, and 32.7 million in Asia-Pacific.
The video streaming giant’s services are not available in Mainland China, Syria, North Korea, Kosovo, Russia and Crimea.
Recent Developments
Recently, Netflix added a ‘Two Thumbs Up’ button to allow users to rate what they are watching. This option will help the company make better recommendations for the content that users may want to watch in the future.
In a blog, Netflix said, “A Thumbs Up still lets us know what you liked, so we use this response to make similar recommendations. But a Double Thumbs Up tells us what you loved and helps us get even more specific with your recommendations.”
The ‘Two Thumbs Up’ button is there along with the Thumbs Up and Thumbs Down options.
Meanwhile, the company is scheduled to release its first-quarter results on April 19. Monness analyst Brian White offers some insights into what to expect.
Q1 Expectations
White expects the company to post revenue and earnings of $7.903 billion and $2.88 per share, respectively, against the Street’s estimate of $7.933 billion and $2.90 per share.
Netflix anticipates first-quarter revenue of $7.903 billion, operating income of $1.765 billion, and EPS of $2.86.
Further, the analyst expects the company’s paid global streaming net additions of 2.5 million to 224.4 million, up 8% year-over-year. This equates to global streaming revenue of $7.86 billion, White said. The net additions expectation is same as the Netflix’s guidance.
On the basis of region, White expects paid global streaming net additions of negative 200,000 in the U.S. and Canada to 75 million; 1.1 million in Europe, the Middle East & Africa to 75.2 million; and 1.6 million to total 34.3 million in the Asia Pacific region. Further, he expects the same to remain flat at 40 million in Latin America.
Guidance
The analyst expects Netflix to report sales and EPS of $8.184 billion and $2.85, respectively, in the second quarter of 2022, lower than the Street’s estimate of $8.212 billion and $3.01 per share.
For full-year 2022, White anticipates revenue to total $33.193 billion, EPS of $11.32, operating margin of 20.4%, and free cash flow of $735 million.
Analyst’s Opinion
The analyst has maintained a Hold rating on the stock but refrained from providing a price target.
White said, “Although the content on Netflix has been exceptional over the past couple of years, nefarious forces appear to be lurking beneath the surface of Netflix’s post-lockdown recovery, either in the form of a slower-than-expected healing process after the pandemic-driven pull forward, a weaker-than-expected global economy, or a platform that has simply hit a near-term growth wall.”
Consensus Rating
Overall, the stock has a Moderate Buy consensus rating based on 17 Buys, 15 Holds and two Sells. Netflix’s average price target of $501.48 implies 43.1% upside potential. NFLX stock closed 1.8% up on Wednesday at $350.43.
Website Traffic
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Netflix’s performance.
According to the tool, Netflix’s website traffic registered a 1.1% rise in global visits in March, compared to February. However, the website traffic has declined 9.1% year-to-date against the same period last year.
Conclusion
NFLX has lost 33.3% in the last three months, 44.7% over the past six months, and 35.1% during the last year. This is because the platform has been facing fierce competition from new players that have entered the video streaming market since the onset of the COVID-19 pandemic. It has now become crucial for the company to report upbeat quarterly results to regain investors’ confidence and get the much-required boost.
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