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Netflix Q1 2024 Earnings Preview, Analyst Estimates

Wall Street is betting that Netflix‘s stream machine continued to fire on all cylinders coming into 2024.

After netting a whopping 13.1 million new subs in Q4, Netflix is riding a wave of momentum that continues to be buoyed by the paid-sharing strategy, as it converts password borrowers into paying members, according to analysts. Netflix “remains the undisputed leader in streaming TV,” Macquarie Equity Research’s Tim Nollen said in a research note to clients Monday.

Netflix is scheduled to report Q1 2024 earnings after market close Thursday (April 18). The company previously said it expects Q1 net adds to be higher than the year-earlier period, when it gained 1.75 million subs. And financial analysts anticipate the number to be much, much higher, with several raising their price targets on the stock — which has zoomed 86% in the last 12 months — ahead of the Q1 earnings report based on upward revisions to their financial estimates.

Morgan Stanley’s Ben Swinburne estimates Netflix reeled in 7.5 million new paid customers in the first quarter, with Q1 featuring more “breakout hits” than the year-end 2023 quarter, such as live-action series “Avatar: The Last Airbender,” “Fool Me Once” and “The Gentlemen.” In an April 12 note, the analyst raised his price target on Netflix’s stock from $600 to $700/share, based on better-than-expected subscriber growth driving higher earnings (with Morgan Stanley’s estimated 2026 earnings per share increasing from $27 to $29).

According to Morgan Stanley’s analysis, licensed series represented less than 10% of aggregate engagement among the top 50 shows from Q3 2021 to Q1 2024. Over that time period, 47 of the 50 most-viewed movies were Netflix originals. “Licensed content plays a key role for Netflix and represented 56% of net content assets (released + licensed) on the balance sheet at [year-end 2023],” according to Swinburne. “However, it is clearly original programming, largely exclusive to Netflix, that drives scaled engagement.”

“Content quality is subjective, but what is not subjective are Netflix’s structural competitive advantages,” Swinburne said in the note. “We believe the market may be underestimating the benefits that Netflix extracts from 1) non-English language content, 2) the depth of viewing across its thousands of titles, and 3) the impact of Netflix original programming and exclusivity on its platform.”

“In aggregate, these advantages reinforce our bullish view in the long-term growth and return on capital for the business,” Swinburne wrote.

TD Cowen’s John Blackledge raised estimates for paid Q1 2024 net adds to 5.11 million (up from 3.6 million previously), reflecting Netflix’s continued momentum in paid sharing. The analyst boosted his 12-month price target on the stock from to $600 to $725.

“Netflix is benefiting from a dual tailwind of paid sharing initiatives as well as strong underlying biz demand from a robust, increasingly global content slate,” Blackledge wrote. He added that a TD Cowen survey of 2,500 U.S. consumers found that Netflix remained the most popular choice for living-room viewership in Q1 (24% of respondents, followed by YouTube at 14% and basic cable at 12%).

Macquarie’s Nollen also raised his target price on Netflix stock, from $595 to $685, maintaining an “outperform” rating. Netflix’s recent initiatives in cracking down on password sharing and introducing the lower-cost, ad-supported tier “have successfully reaccelerated its sub and [average revenue per member] growth,” he wrote in a Q1 earnings preview. “While still early in its advertising journey, early signs indicate potential upside to out-year estimates. We believe the company remains the undisputed leader in streaming TV.”

Nollen noted that Netflix has not raised the price of its Standard plan ($15.49/month in the U.S.) since January 2022 and is due for a price hike. “We believe Netflix has pricing power relative to competitors and can flex this muscle,” he wrote.

Wedbush Securities is modeling Netflix net adds of 8.5 million for Q1, including 2 million in the U.S. and Canada. In addition to growth from paid sharing and incremental revenue from Netflix’s ad-supported plan, Wedbush’s Alicia Reese anticipates “further catalysts ahead,” such as the “full digestion of the advertising potential” of the WWE deal starting in 2025, as well as gaming expansion into more licensed IP. “We think Netflix has carefully crafted its current content slate with a balance of originals and licensed content, allowing it to manage content costs while remaining the leader in content consumption among streaming peers,” Reese wrote, reiterating Wedbush’s “outperform” rating and $725/share price target.

Overall, analysts on average expect Netflix to post Q1 revenue of $9.27 billion and earnings per share of $4.52, according to data provider LSEG. That’s just slightly higher than the company’s previous guidance ($9.24 billion in revenue, EPS of $4.49).

Pictured above: Netflix’s “Avatar: The Last Airbender”

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