Netflix Set to Unveil Strong Q3 2024 Performance on October 17

Netflix NFLX is preparing to release its third-quarter 2024 results on Oct. 17.

For this quarter, Netflix projects a 14% increase in revenues, translating to 19% growth on a foreign exchange-neutral basis. This growth is influenced by price adjustments in Argentina and the local currency’s devaluation compared to the U.S. dollar.

The company’s revenue forecast for the quarter is $9.77 billion, indicating an impressive 13.9% year-over-year growth. The Zacks Consensus Estimate aligns with this expectation, also predicting revenues of $9.77 billion.

Netflix expects earnings of $5.10 per share, reflecting a 36.7% year-over-year increase. However, the Zacks Consensus Estimate currently stands at $5.07 per share, which is slightly lower than the company’s projection. This estimate has remained unchanged over the past month.

Discover the latest earnings estimates and surprises on Zacks Earnings Calendar.

The upcoming results are likely to benefit from Netflix’s diverse content strategy, which emphasizes significant investments in both localized and foreign-language productions.

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Review of Earnings Surprise History

In the previous quarter, Netflix achieved an earnings surprise of 3.83%. Over the past four quarters, the company outperformed the Zacks Consensus Estimate three times while missing it once, resulting in an average negative surprise of 6.15%.

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Earnings Predictions

Our analysis indicates a potential earnings beat for Netflix this quarter. The earnings surprise prediction (ESP) model, combined with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold), enhances the chances for a positive surprise. Currently, NFLX has an Earnings ESP of +1.37% and holds a Zacks Rank #2.

You can explore the complete list of today’s Zacks #1 Rank stocks here.

Components Influencing Expected Results

Netflix foresees a decline in paid net additions compared to the third quarter of 2023, which marked the first full quarter with the impact of paid sharing. As with recent quarters, the company anticipates global average revenue per member (ARM) to remain roughly flat year over year due to foreign exchange challenges and variations in plans and countries.

The streaming leader has executed strategic measures that likely contributed to its revenue growth. A notable initiative has been the introduction of lower-cost, ad-supported plans, attracting budget-conscious consumers while generating new revenue avenues. This strategy has successfully broadened Netflix’s subscriber base.

Additionally, the crackdown on password sharing through new paid sharing features is now in effect across over 100 countries, representing over 80% of Netflix’s revenue. This move is expected to convert previously shared accounts into paid subscriptions, potentially boosting subscriber numbers and revenues this quarter.

Netflix’s expanding gaming portfolio includes popular titles such as Grand Theft Auto: The Trilogy and recent additions like Virgin River and Perfect Match, which aim to enhance user engagement and attract new subscribers. This pivot into gaming showcases the company’s commitment to a diverse entertainment offering.

Despite these advancements, Netflix faces strong competition in a crowded streaming market. Rivals include Disney’s DIS Disney+, HBO Max, Peacock, Paramount+, Apple’s AAPL Apple TV+, and Amazon‘s AMZN Prime Video. Furthermore, it competes for viewer attention with traditional linear television, YouTube, short-form platforms like TikTok, and the gaming industry.

Revenue Growth Estimates for Q3

The Zacks Consensus Estimate for total paid streaming net membership additions stands at 4.75 million.

The consensus for Asia-Pacific revenues in Q3 2024 is $1.09 billion, indicating a 15% increase from last year.

Latin America revenues are projected to reach $1.23 billion, reflecting a rise of 7.6% from the previous quarter.

Estimates for Europe, the Middle East, and Africa (EMEA) revenues show a figure of $3.13 billion, marking a 16.3% increase compared to last year.

In the United States and Canada, revenues are expected to reach $4.31 billion, indicating a 15.6% rise year-over-year.

Stock Performance & Valuation Insights

Year-to-date, Netflix’s shares have surged by 48.5%, outpacing the Zacks Consumer Discretionary sector and competitors like Apple (25.9%), Amazon (18.2%), Disney (24.3%), and the sector as a whole increased by 4.3%.

Netflix Surpasses Sector and Competitors

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Analyzing Netflix’s current stock valuation, NFLX trades at 7.32 times its forward 12-month sales, above its five-year median of 6.4 times. In comparison, the Zacks Broadcast Radio and Television industry’s forward earnings multiple is 2.84 times. Thus, while Netflix’s current valuation appears elevated against its historical range and the broader industry, it continues to attract investor interest.

Forward Price-to-Sales Ratio (Next 12 Months)

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Investment Prospects: Weighing Risks and Benefits

Netflix serves as an attractive investment opportunity, leading the global streaming market with exceptional content production capabilities. Consistent delivery of hit shows and movies fuels subscriber growth and retention. Recent strategies, such as launching ad-supported tiers and expanding into gaming, are diversifying revenue sources and expanding Netflix’s market reach.