Netflix (NASDAQ: NFLX) has confirmed that it will release its earnings for Q4 2021 on Thursday 20, 2021, after market close.
What to look for
The content streaming company expects robust subscriber growth in the quarter under review considering scale-up of content production. As a result, the stock has been under pressure in line with wider growth equity sell-off in recent weeks. To date, the stock has dropped 10.3%, and when the company released its earnings on Thursday, investors will be keen on its subscriber number as a possible catalyst to driver stock movement.
Earnings: Stockearning’s Estimated EPS for Q4 2021 is expected to be around $0.85 per share. In the third quarter, the company had earnings of $3.19, beating estimates by 24.61%. Historical EPS performance shows that the company has, in the past 12 quarters, beat estimates seven times (58%) and missed five times (41%).
Revenue: the company is expected to post revenue of $7.71 billion, representing a YoY growth of 16%.notably, the company anticipates subscribers to have increased 9% in the fourth quarter to 222.06 million from the last quarter. For the nine months ending September, the company had spent $12 billion to add new content to its platform, and in Q4, it is expecting 8.5 million new subscribers.
Stock movement: NFLX shares have gained 17.1% since the company released its third-quarter earnings. Interestingly, NFLX shares have been DOWN 28 times out of the past 48 quarters. So, the historical price reaction suggests a 58% probability of the share price going DOWN once the company reports its fiscal Q4 2021 earnings. According to the Stockearning algorithm, the predicted first-day move is 10%, while the predicted move on the seventh day is 12%.
What analysts are saying
Morgan Stanley analyst Benjamin Swinburne noted that they believe that the share performance depends on increasing its membership scale globally. The analyst said that the proven success in the US and global markets offers a roadmap to success in upcoming markets, and scale will allow the content streaming firm to leverage content investments to boost margins. Also, he pointed out that high global broadband penetration will increase the company's addressable market, drive subscriber growth and allow Netflix to further its global presence.
UBS analyst John Hodulik lowered his price target in NFLX from $720 to $690 but maintained a Buy rating on the stock. According to the analyst, Netflix's net subscription additions likely increased in Q4. Still, they fell short of management's expectations as momentum dropped throughout the quarter due to the late September debut of Squid Games. The industry is still processing the pandemic's outsized growth despite the rich content lineup, but the stock's 25% drop from November peaks may have factored this in, according to Hodulik.
KeyBanc analyst Justin Patterson lowered his price target on the stock from $725 to $620 to reflect his lower estimates and multiple in line with five years median. Patterson maintains a “Buy” rating on the shares.
Credit Suisse analyst Douglas Mitchelson has a Buy rating in NFLX with a price target of $740. The analyst sees four distinct dynamics for Netflix shares heading into Q4, including investor interest at its lowest level in eight years, fading sentiment regarding Q4/Q1 2022 net adds due to some critical reviews, Netflix results that are the defining moment for the stock's thesis and nothing in download data that assists in predicting Q4 net adds.
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