NETFLIX, "flixing" its Earnings Muscles on 23 Jan 2024?
Record Breaking Levels.
US stocks edged higher on Mon, 22 Jan 2024 with the $S&P 500(.SPX)$ and $DJIA(.DJI)$ notching another record high close.
This comes as investors became more upbeat about:
Health of US economy.
Looked to future earnings for signs of an Artificial Intelligence (AI) boom for tech stocks.
The S&P 500 gained +0.2% after the index notched its first record close since January 2022 on Friday.
The Dow Jones Industrial Average (DJIA) also rose +0.4% to close above 38,000 level for the first time ever.
Lastly, stocks in the tech-heavy Nasdaq jumped +0.3%.
When market closed at 4:00pm US time:
DJIA: +0.36% (+138.08 to 38,001.81).
S&P 500: +0.22% (+10.62 to 4,850.43).
Nasdaq: +0.32% (+49.32 to 15,360.29).
The AI euphoria continues to surge in tech shares, has helped to pull stocks out of their early-2024 doldrums, bringing the major indexes into positive territory for January 2024.
Quarterly results will continue to hold centre court for the coming weeks as Mega cap companies announce their Q4 2023 results progressively.
Two keenly watched US stocks for this week are none other than:
As part of the Magnificent Seven and FAANG respectively, the “tech” earnings results could indicate where the market heads in the short term.
This comes after the Fed’s comments have buffeted stocks before the onset of the blackout window (from 20 Jan 2024 to 01 Feb 2024); ahead of the FOMC meeting scheduled for Jan 30-31.
Like it or not, it is akin to a cat & mouse game on who would be able to accurately guess when the three interest cuts will be carried out.
Market’s (current) sentiments on the most probable Fed funds rate for all 8 FOMC meetings are: (see below)
Based on latest CME FedWatch tool readings, market is expecting:
First interest cut in May 2024.
Second interest cut in Jun 2024.
Third interest cut in July 2024.
With the 3 “guess-timations”, Fed funds rate will reach the -0.75% interest cut as shared by the Fed for 2024.
Back in 18 Oct 2023, Netflix reported its better than expected Q3 2023 earnings after market closed for the day.
When trading resumed on 19 Oct 2023, its stock price surged by an impressive +16%.
NFLX - Q3 2023 earnings
According to Street Account, the main catalyst was, the streaming giant added 8.76 Million global subscribers during the third quarter, higher than 5.49 Million (+59.56% higher) Wall Street had expected.
Netflix Q4 earnings estimates.
Going into Q4 2023 earnings reporting (after market closed) what is Wall Street expectations?
(1) Revenue & EPS.
Revenue is expected to come in at $8.71 Billion vs $7.85 Billion (Q4 2022). This will be a +10.96% gain YoY.
Earnings per share (EPS) is forecasted to come in at $2.23 vs $0.15 (Q4 2022). This will be a +
1,386% gain YoY.
In terms of pricing, Netflix has introduced a new “with Ads” subscription at $6.99.
Along with existing product - “Standard” and “Premium” that saw its pricing increased by approximately +55% & +15% respectively back in November 2023.
These increases should translate to higher revenue in latest quarterly earnings.
QoQ growth is expected to be +1.99%.
YoY growth is expected to be +54.71%, “exceeding” with market expectations.
In terms of global subscription, it is expected to rise further to 25.2 Million.
This represents a +83.15% gain YoY and should keep Wall Street “happy” with the outcome.
Stock’s performance
Looking at Netflix past year’s performance, it bottomed on 10 Mar 2023 at $292.76 per share.
Incidentally, this was the time where US banking debacle occurred.
It turned the tide and kept rising; after handing in a more than stellar Q3 2023 earnings report.
The media landscape in the US is a very challenging business and consumers are spoilt for choice.
To be able to retain the #1 position is not an easy task.
Compared to its “streaming peers” (see above), Netflix is at a comfortable position now.
However, to consistently maintain its pole-position, Netflix will have to dig even deeper to crack the code on (a) retaining its existing customer pool, while (b) bringing in new blood to grow the customer base.
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