McNulty says ‘no one is even near’ Netflix after its Q3 earnings

Netflix Inc (NASDAQ: NFLX) just reported strong results for its third financial quarter on the back of its crackdown on password sharing and a new ad-supported tier that it expects will eventually be a “multibillion-dollar revenue stream over time”.

Netflix beats the street in subscriber growth

Investors are cheering primarily because the streaming giant came in well above Street estimates for net new subscribers.

Netflix added 8.76 million subscribers in its recently concluded quarter versus 5.49 million only that analysts had forecast. On CNBC’s “Power Lunch” Michael Morris – a Senior Analyst at Guggenheim said on Wednesday:

We continue to be bullish on long-term prospects for Netflix at the core [of which] is its best-in-class content. This is a company that sources the most global content for streaming.

The mass media company expects somewhat of an identical subscriber growth in its current financial quarter as well. Its shares are down 20% versus their year-to-date high at writing. Watch here: https://www.youtube.com/embed/rZcD8FYRc94?feature=oembed

Netflix’s guidance for the fourth quarter

Netflix stock is being rewarded also because the California-based company issued future guidance today that was roughly in line with expectations.

It is now calling for $8.70 billion in revenue for the fourth quarter on $2.15 of earnings on a per-share basis versus experts at $8.77 and $2.16 a share, respectively. The Guggenheim analyst added:

Couple of initiatives the company has undertaken [recently] – an advertising tier and a crackdown on password sharing, both of which are big, important parts of near-term bull case.

Morris has a “buy” rating on Netflix stock with a price target of $460 which suggests close to a 20% upside from here.

Netflix raised prices again on Wednesday

Netflix did not disclose the number of subscribers it now has on its ad-supported tier but said that membership plan grew a whopping 70% in Q3.

It is also worth mentioning that the Nasdaq-listed firm decided to further raise the price of its basic and premium services on Wednesday. The ad tier, however, remain at $6.99 a month in the United States.

Netflix will likely see higher production costs moving forward following the Hollywood strike. Still, its management expects operating margin to be at 20% (upper end of the previous guidance) this year and 22.5% in 2024. According to Sean McNulty of “The Ankler”:

Netflix has dropped over 120 series, movies, new documentaries, and specials in the first nine months this year. So, in a volume point of view, no one is even near them. They consistently deliver biggest numbers in streaming.

Notable figures in Netflix Q3 results

• Earned $1.70 billion versus the year-ago $1.40 billion
• Per-share earnings also climbed from $3.10 to $3.73
• Revenue jumped 8.0% year-over-year to $8.54 billion
• Consensus was $3.49 a share on $8.54 billion revenue

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