Adding to these, Netflix has faced a host of challenges including an unfriendly environment for tech companies, questions about where its future growth will come from, an increasingly competitive environment for streamers, and the rising cost of content and talent.j
As a result, Netflix's shares are down 55% YTD which is nearly double the Nasdaq's YTD loss of 31%. And, they are down more than 60% from their all-time high set in October 2021. However, shares are up more than 60% from their recent low of $162 in June of this year.
Inside the Numbers
In Q3, Netflix reported $3.10 in earnings per share which handily topped estimates of $2.13 per share. Revenue also edged out estimates at $7.9 billion vs expectations of $7.8 billion. The biggest surprise may have been the company adding 2.4 million subscribers, while analysts were expecting a net addition of 1.1 million subs.
Most of this growth came from the Asia-Pacific region, while North America only saw a growth of 100,000 subs.
The company also announced plans to crack down on password sharing by charging accounts an additional fee for extra users. It's also launching a lower-priced, ad-supported tier which is expected to launch in November.
It believes its advertising business has major potential, although it sees this segment growing gradually.
For the next quarter, the streamer sees an addition of 4.5 million new subs which is nearly twice that analysts' expectations. It also sees revenue of $7.8 billion which was slightly lower than expected with the strong dollar posing a headwind.
One remarkable development for Netflix is that its valuation has significantly improved to a P/E of 25 after it was one of the most expensive stocks of the past decade. This is due to continued earnings growth and a decline in the stock price.
Going forward while shares have rebounded, it remains uncertain whether it can get back on a strong growth path especially given the slew of competitors and the rising threat posed by Amazon