Overall, Netflix shares are now up more than 100% from its May lows after the stock dropped by more than 50% between April and mid-May. In total, shares dropped by 77% from November 2021 to its May low, before the current rebound. Now, they are a little more than 50% off from it's all-time high.
Yet, it's fair to say that the company has never been in a better position from an operating and financial perspective. Earnings are projected to increase by 26% next year, while most consumer and tech stocks are forecast to see a material decline. And, the combination of a lower stock price and earnings growth has resulted in an attractive forward P/E of 24. But, the company continues to face a variety of headwinds in the form of competition from other streamers and upwards pressure on the cost of content.
Inside the Numbers
In Q4, Netflix reported $0.12 in earnings per share which fell short of expectations of $0.45 per share in earnings. Revenue was in-line with projections at $7.9 billion vs $7.9 billion. However, the company blew out expectations for global paid net subs at 7.7 million vs 4.6 million.
The company attributed its earnings miss to the strong dollar and weakness in its European traded debt. Yet, investors chose to overlook this especially as margins came in at 7%, above expectations. Additionally, the company's new ad-supported tier seems to be more popular than expected, although the company didn't reveal exact figures for this cheaper option.
However, it did say that most of its customers weren't switching plans, indicating that it's an effective lure for new customers. The company also had a series of hits in Q4 which also likely catalyzed subscriber growth. This included the TV show 'Wednesday', the 'Harry and Meghan' documentary, and 'Glass Onion'.
In terms of a forecast, the streamer sees Q1 revenue growth of 4% which was slightly higher than Wall Street estimates. The company expects that its new paid-sharing program will increase revenue per user as it looks to make money from people who are sharing passwords with people outside their homes.