Netflix (NFLX Stock) storms up the hill in Q4, hastings steps down as co-CEO
The last few months have been positive for the Netflix share price, after hitting a 5-year low in May last year, shares have jumped over 75% since then, although they are still lower over 50% to record highs seen in 2021. .
When the company reported in Q3 there was some skepticism that adding an ad tier could cannibalize its existing user base as the streaming market becomes increasingly competitive. A big concern for investors is how Netflix, which has no other sources of income, will be able to compete with its wealthier rivals from Amazon, Disney, Apple and now Paramount.
Nonetheless, management expressed confidence that it could end the year on a high note with hopes that it would be able to deliver a strong final quarter, saying it expected to generate $7.78 billion. revenue dollars.
Net income is expected to fall to $163 million or C$0.36 and operating margin to fall to 4.2% from 8.2% a year ago. The number of subscribers is also expected to increase by 4.5 million to reach a new record of 227.6 million.
The question that was being asked given the strong rebound in the share price over the past few months was whether Netflix would be able to deliver the goods, and last night’s results answered that question forcefully with a resounding yes, certainly as far as subscribers are concerned. , aided by content like the Knives Out movie, Glass Onion, and the surprise Addams Family spinoff Wednesday.
Fourth quarter revenue beat expectations at $7.85 billion, as did the number of paid subscribers that beat expectations at 7.66 million and hit 230.75 million, an increase 4% over one year, including 3.2 million from the EMEA region.
After ending the day lower yesterday, results last night saw the stock price rebound strongly in after-hours trading, with the big test of whether it can sustain that move when the US exchanges will reopen later today.
With such a surge in subscribers, it’s perhaps surprising that revenue hasn’t increased, suggesting that there may have been some cannibalization due to the rollout of the new ad-tier service. .
Profits, on the other hand, were ca$0.12m, or $55m, which the company attributed to an unrealized loss of $462m on its non-euro denominated debt due to the depreciation of the dollar. US against the euro during the fourth quarter.
Operating margin came in at 7%, which was at the upper end of expectations, and unlike last year’s fourth quarter, Netflix was able to generate positive cash flow in the fourth quarter of $332 million.
Total revenue for 2022 was $31.62 billion, while operating expenses reached $25.99 billion, reducing the annual operating margin to 17.8% from 20 .9%.
For Q1 23, Netflix says it expects to generate revenue of $8.17 billion and earnings of $1.27 billion or $2.82 per share.
As noted in the Q3 shareholder letter, Netflix is no longer offering subscriber count guidance, but that it would be rolling out paid sharing in Q1, which could lead to short-term cancellations as it seeks to crack down on password sharing.
The company also announced that co-CEO Reed Hastings will step down and take over as executive chairman, while Greg Peters will fill the vacant position of co-CEO alongside Ted Sarandos.