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Monday, July 15, 2024

Netflix’s Better-Than-Expected Q4 Revenue Got A Boost

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Netflix’s Better-Than-Expected Q4 Revenue Got A Boost From Strong Subscriber Growth

Key Metric

After relatively flat subscriber growth at the end of 2021 and through most of 2022, Netflix has gained momentum in recent quarters due to its tiered pricing structure and a crackdown on password sharing. The lowest pricing tier at $6.99 is ad-supported, another way for the company to monetize.

In the fourth quarter, Netflix had 260.28 million paying customers globally, up 12.8% compared to the year-ago quarter.

Investors should watch for information from Netflix on how the password-sharing crackdown has impacted subscriptions as well. Bank of America analysts expect this policy, now also several quarters old, to continue to fuel accelerating net subscription growth, with an estimated 9 million total net added subscriptions for this quarter compared with 7.7 million a year earlier.

Business Spotlight

Netflix aims to increase its value proposition for customers so that it can justify raising prices on subscription plans. In November, the company increased the monthly fee for two of its subscription tiers.3

Investors should watch for signs that customers view the increases as reasonable in the upcoming earnings report. Netflix’s expansion into the gaming space, which began two years ago but accelerated in the last several months, could be a key factor in the company’s decision to increase prices.4

Netflix shares rose last spring and early summer before falling between August and October. The stock finished the year with another rally, bringing its 1-year return to about 36%.

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