The estimates are higher than company expectations!
After the market close, Netflix (NFLX) will publish its Q4 2022 earnings results on Thursday, January 19th. Consensus expectation based on different financial institutes is about $7.83 billion in revenue in the fourth quarter, 1.6% higher than the same quarter a year ago. The guidance provided by the company shows the sales expectation at $7.78 billion.
While operating income, the headline earnings measure, is expected to rise by 43% from last year to $362.4 million, EPS should decrease sharply to 0.41% based on the Zacks investment research data. Netflix's guidance for quarterly operating profit is $330 million and EPS of $0.36.
2022 does not evoke good memories for Netflix shareholders. After Q1, when the earnings report brought a dramatic surprise by losing 200,000 members, NFLX share prices fell sharply. However, after that and in the following two reports, the company could beat the subscriber growth expectations. In Q3, NFLX reported 2.4 million new subscribers, exceeding the 1 million expectation. Subscriber growth will be the primary focus of Thursday's report, and the company expects about 4.5 million new subscribers over the quarter. NFLX added 8.3 million new paid users in the same period of 2021. We indeed have excellent expectations from the report, but we should remember that it is Q4, which is traditionally a weak quarter, especially after two great reports.
Recently, with the aim of better competition with rivals, launched the company's advertising-supported tier called "Basic with Ads," which went live in early November. In this new subscribers plan which is cheaper, users can pay less but accept to see the advertisement between the videos. While competitors like Apple, Disney, and Paramount are increasing their monthly subscription fees, this affordable plan should help Netflix to enrich its subscribers and income.
In addition to our general pessimism about the fourth quarter, we should remember that about 60% of revenue comes from overseas while costs are in US dollars. More expensive USD compared with other currencies can lower the net income.
From the 2022 high, Netflix's share lost almost 75% in the middle of the year to touch its five years low, but after that, we can see a strong recovery. While from a technical overview, we are positive, and we can see the signs of recovery with strong resistance around $333, considering multiple headwinds, including the potential recession in most developed and developing economies and concerns about the effectiveness of Netflix ad-supported plans in the longer term, fundamental data says it cannot be such a good investment, the holding could be the best suggestion.
$305 is the first support, while a pivot is at $250. For 2023, the target is about USD 400, of course, in an optimistic state.
