The anticipation surrounding Netflix Inc.’s upcoming earnings report continues to fuel debate among analysts. While some warn of heightened expectations, others hold a more bullish view of the latest quarter.
Positive Outlook from UBS Analyst
Earnings Release Date
Investors won’t have to wait much longer as Netflix’s second-quarter earnings are set to be released on July 19 after the closing bell.
Crackdown on Account Sharing
Netflix’s recent crackdown on account sharing appears to be yielding positive results. Hodulik notes that third-party data points indicate favorable engagement levels, increased downloads, and heightened search interest in newly launched paid sharing markets.
The future looks promising for Netflix as they continue to navigate this ‘once-in-a-lifetime opportunity.’
Google Search Interest and Netflix’s Account-Sharing Clampdown
During the second quarter, Google search interest in canceling Netflix accounts saw a decline in markets where Netflix implemented its account-sharing clampdown. This was in contrast to Canada and Spain, where Netflix introduced its paid-sharing initiative earlier.
The Impact of Paid Sharing on Revenue
Analyst Hodulik believes that paid sharing will contribute to a revenue increase of over 5%. He also views the roll-out of this initiative as essential in driving advertising growth through a better ad-tier mix and improved targeting. In Canada, Netflix removed its basic ad-free tier (and de-emphasized it in the US), which is estimated to eventually result in a 10% boost to average revenue per user (ARPU). This change is expected to expedite the growth of the ad base beyond previous expectations.
Revenue and Price Targets
While Hodulik anticipates no change in average revenue per user for the June quarter on a currency-neutral basis, he forecasts a 4% increase in the following quarter as the positive effects of paid sharing build.
The analyst has raised his price target for Netflix shares from $390 to $525 in his latest report and maintains a buy rating for the stock. As of Wednesday’s premarket session, Netflix shares were up approximately 1%, with a year-to-date increase of 49%.
Additional Resource
Here’s an overview of what’s new on Netflix in July 2023 and what will be leaving the platform.
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