Netflix
Inside the Numbers
In Q3, Netflix reported earnings per share of $3.19, beating expectations of $2.56 per share. Revenue also beat at $7.48 billion vs $7.4 billion. Both numbers were impressive on a year over year basis with an 83% gain in EPS and 16% jump in revenue.
For Netflix, global subscribers is the key metric and this came in strong as the company showed it can still attract subscribers with 4.4 million new subs beating expectations of 3.8 million. Many believe this is in part due to the new content that is now available on the platform following many months of limited releases due to the pandemic. Next quarter, Netflix expects to add 8.5 million new subscribers due to even more content arriving in November and December.
For 2022, the company said that it should return to a more release schedule by the end of the year. It's also going to change how it measures viewership by focusing on hours watched rather than the number of accounts that watched a show or movie. This measuring method is more similar to how the rest of the industry works especially as anyone watching 2 minutes of a movie or show was previously counted as a viewer.
Netflix also acknowledged the success of "Squid Game" which has become its own cultural phenomenon and Netflix's "biggest TV show ever." An estimated 142 million households watched the show in its first four weeks.
In terms of video games, Netflix is in a testing phase with small pilot programs in select countries. It plans to include these games as part of a subscription package and not include any advertisements or in-app purchases.
Stock Price Outlook
Netflix has been in the news quite frequently as of late. Most infamous is the recent controversy around comedian Dave Chappelle's special "The Closer" which has drawn scrutiny from trans-activists and even some Netflix employees, leading to an employee protest this week.
Despite this controversy, Netflix's stock has been quite strong this year and had been making new highs in recent weeks. Most likely, this is due to the country's resilience in terms of not seeing any drop-off with its gains in subscribers during the pandemic and the launch of its new video game segment which could result in another revenue surge.
What's interesting is that over the past year, Netflix's EPS is up 80% but its stock price is only up 20%. Even more impressive is that Netflix faced some serious threats over the past year such as the rise of other streamers with deep pockets, the paucity of new content, and the end of the pandemic but still was able to maintain its growth trajectory. The next year should be a much better environment for Netflix as it has the video game catalyst and the proven ability to constantly release hit shows.
