Streaming service is 'on a path' to add 2.7 million subscribers -- significantly less than the 4.5 million the company has projected, Barclays analyst says
Netflix Inc. is likely to fall dramatically short of its projected subscriber additions when it reports fiscal fourth-quarter results next week, a financial analyst warned on Tuesday.
Barclays analyst Kannan Venkateshwar cautioned that Netflix (NFLX) is "on a path" to add 2.7 million subscribers -- significantly less than the 4.5 million the company has projected. A drop in app downloads, compounded by a plunge in viewership from last year's record audiences for "Squid Game," account for the subscriber shortfall, he said.
A miss on net subscription additions would snap a brief rebound for Netflix. In October, the company said it added more than 2 million subscribers in the third quarter after stumbling into 2022 with two consecutive quarterly subscriber declines. (Starting this quarter, Netflix will stop offering forecasts of net subscriber adds, which have proved to be the one factor with the greatest influence on stock movement in recent years.)
Given Netflix's quick pivot to a lower-priced advertising-supported subscription tier, as well as its planned crackdown on shared accounts, the company will shift its guidance -- and emphasis-- to revenue, net income, earnings per share, operating income, operating margin and shares outstanding.
Analysts polled by FactSet are expecting Netflix to report $7.83 billion in revenue and adjusted earnings of 64 cents a share in the fourth quarter. In the same quarter a year ago, the company reported $7.71 billion in revenue and earnings of $607 million, or $1.33 a share.
Still, Venkateshwar cautioned that without reporting net subscriber additions and with a shift to an ad-supported plan in lieu of more expensive options, Netflix's stock could face increasing volatility.
Netflix shares closed higher 3.9% on Tuesday and rallied 11% this year. The broader S&P 500 has inched up 2% so far in 2023.