Netflix (NFLX) is set to report first quarter earnings after the bell on Tuesday as investors eagerly await updates regarding the company's recently launched ad-supported tier, in addition to its controversial crackdown on password-sharing.
Here's what Wall Street expects from the streaming giant, according to Bloomberg consensus estimates:
Revenue: $8.18 billion
Earnings per share (EPS): $2.86
Subscribers: 2.3 million net additions
The company previously said it will no longer provide subscriber growth guidance as "revenue is our primary top line metric." As a result, commentary surrounding its various revenue initiatives will be paramount for analysts and investors.
"We're still very early in both [advertising video on demand] and paid sharing, but any commentary on conversion, churn and/or adoption of the new offerings is more important to our thesis than 1Q results," Jefferies wrote in a client note earlier this month.
The bank estimated both initiatives will drive a "reacceleration" towards double digit revenue growth by the end of 2023 and well into 2024, although there will likely be "a lot of noise" in the current quarter ahead of that upside.
Jamie Lumley, sector analyst at Third Bridge Group, weighed in on some of that noise in a new interview with Yahoo Finance Live on Monday.
The analyst called out Netflix's initial target of attracting 40 million ad-based subscribers by the end of 2023, describing the estimate as "increasingly unrealistic" amid slowing subscriber momentum and an ultra-competitive landscape.
He projected ad-based subscribers will likely fall in a range between 10 million to 20 million, cautioning: "There needs to be a bit of tempering of expectations here when it comes to those numbers."
The ad plan, dubbed "Basic with Ads," comes at a cost of $6.99 a month in the U.S. and serves as a complement to Netflix's existing ad-free tiers — the Standard plan ($15.49 a month) and the Basic plan ($9.99 a month.)
In regards to Netflix's password sharing crackdown, Wells Fargo analyst Steve Cahall remained bullish, writing in a note last week: "We think NFLX's 1Q23 print will be less about quarterly results and more about the upcoming U.S. paid sharing implementation."
Netflix broadened its crackdown to include countries like Canada, New Zealand, Portugal, and Spain, in addition to the test countries of Chile, Costa Rica, and Peru. So far, there has been no announcement regarding U.S. users.
"U.S. implementation feels a bit delayed, but we think that will feed incrementally bullish comments from [management] about the sub/revenue opportunity," he added, estimating extra member pricing —or the cost to the user of adding more members to their accounts — will come in at about $8 a month in the U.S.
Netflix has recently leaned on differentiated content like live programming to lure in subscribers; however, that effort took a significant hit late Sunday after the company failed to successfully broadcast its "Love is Blind" live reunion special.
Users angrily expressed their frustrations on Twitter after waiting over an hour for the episode to air. The company eventually pivoted to filming the show, rather than broadcasting it live — much to the dismay of fans. The episode was released Monday afternoon.
"[What happened Sunday night] is definitely not good when a player like Netflix is really trying to boost those subscriber numbers," Lumley said. "There's still some work needed in order to work out exactly how to have a live event be seamless, be effective, and be a good way of drawing viewers in."
Investors will look to Netflix management to address the live event stumble on the earnings call following Tuesday's results.
(Source: Yahoo Finance), all rights reserved by original source.