NFLX
surged in after-hours trading on Tuesday following the company's impressive fourth-quarter results. The streaming giant added 13.1 million subscribers during the quarter, surpassing Wall Street's expectations. This growth can be attributed to Netflix's expansion of its ad-supported service and its efforts to tackle password sharing. As a result, Netflix now boasts a record-breaking 260.8 million paid subscribers. Key highlights on 4th quarter financial performances:
- Net income: $937.8 million, or $2.11 per share, compared to $55.3 million, or 12 cents per share, in the same period the previous year.
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What’s doing well
Netflix's focus on improving profitability is evident in its increased 2024 full-year operating margin forecast, which has been raised to 24% from the previously projected range of 22% to 23%. The company attributes this positive outlook to a stronger-than-expected performance in the fourth quarter and the weakening of the U.S. dollar. Furthermore, Netflix projects earnings per share of $4.49 for the first quarter of 2024, surpassing Wall Street's estimate of $4.10.
While other streaming competitors struggle with profitability and reduce content spending, Netflix remains committed to investing in an extensive content library. However, the company clarified that it will not pursue acquisitions of traditional entertainment companies. In the shareholder letter, Netflix stated that it anticipates further consolidation in the industry and it aims to partner with content creators from the traditional space. In line with this strategy, Netflix announced a significant move into live entertainment by securing the rights to stream WWE Raw starting next year.
Challenges ahead
Netflix acknowledges the ongoing competition in the streaming market and emphasizes the importance of enhancing its entertainment offerings. While competitors scale back on content spending, Netflix continues to invest in its content library to attract and retain subscribers.
As part of its revenue diversification efforts, Netflix is exploring opportunities in advertising. Although ads are not expected to be the primary revenue driver in 2024, the company is focused on scaling its advertising-based plan. Netflix has seen growth in its advertising user base, with more than 23 million global monthly active users reported. The company aims to make the ad tier more appealing to advertisers by enhancing features, expanding sales teams, and improving ad operations.
Technical wise
Netflix has been trending up since it hit bottom in May last year. The next strong resistance level is at around $560.
In summary
Netflix's strong subscriber growth, improved financial performance, and strategic initiatives to boost profitability and diversify revenue streams have contributed to its positive outlook. The company's focus on content investment, expansion into live entertainment, and exploration of advertising opportunities position it for continued success in the highly competitive streaming market.