Topline
Netflix beat Wall Street expectations for profit and user growth during the third quarter, sending its stock surging.
Key Facts
Netflix brought in $8.54 billion of revenue during the three-month period ending September 30 and $3.73 earnings per share, comparing favorably to consensus analyst estimates of $8.54 billion and $3.49, respectively, according to FactSet.
The firm reported nine million net paid subscriber adds, exceeding estimates of 6.08 million, bringing its global paid subscriber base to 247.2 million.
Shares of Netflix spiked 9% to nearly $380 following the report’s release, paring a 3% drop during regular trading Wednesday.
Key Background
It’s been a whirlwind three-year stretch for Netflix investors as the company’s share price more than doubled early in the pandemic as stay-at-home orders proved to be a boon for streaming, before the stock crashed about 75% during 2022’s first half as the company reported its first quarters of subscriber losses in a decade. The stock has since recovered as subscriber growth continued following Netflix’s crackdown on password sharing and launch of a cheaper tier with ads. Netflix initially rallied during this summer’s strike of Hollywood actors and writers as analysts expected the streamer’s backlog of content to perform favorably compared to peers though that rally quickly faded. In a note to clients last week, Goldman Sachs analysts led by Eric Sheridan attributed Netflix stock’s loss of momentum to “investor concerns” about revenue growth after executives downplayed the ad tier’s ability to drive near-term expansion. Shares of Netflix are down about 25% over the last three months but remain up more than 20% for the year.
Crucial Quote
“Netflix now closely resembles a utility in many markets, giving it status as a long, durable service. The challenge of being labeled a utility, of course, is how a maturing company continues finding growth,” Bernstein analysts Laurent Yoon and Mark Shmulik wrote earlier this month, reflecting Netflix’s challenge at growing its already massive subscriber base.
Big Number
$153 billion. That was Netflix’s market capitalization at Wednesday’s close, narrowly behind legacy rival Disney’s $155 billion valuation. Netflix’s market cap peaked at over $300 billion in late 2021.
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