Streaming giant Netflix Inc (NASDAQ: NFLX) is set to report third quarter financial results after market close Wednesday, Oct. 18.
Here's a look at the estimates from analysts, their latest commentary, and the primary concerns for investors and analysts.
Earnings Estimates: Netflix is expected to report third-quarter revenue of $8.537 billion, according to data from Benzinga Pro.
The revenue would be an increase on the $7.926 billion reported in the same quarter of the last fiscal year.
Netflix has missed revenue estimates from analysts in five of the last seven quarters, including the first and second quarters of the current fiscal year.
Analysts expect Netflix to report earnings per share of $3.47 for the third quarter, up from last year's $3.10 reported in the third quarter. The company has beaten earnings per share estimates in seven of the last eight quarters.
Guidance from Netflix released during its second quarter financial results calls for revenue of $8.52 billion and earnings per share of $3.52.
"We expect revenue growth will accelerate in the second half of 2023 as monetization grows from our most recent paid sharing launch and we expand out initiative across nearly all remaining countries plus the continued steady growth in our ad-supported plan," Netflix said at the time.
What Analysts are Saying: Several analysts have released updated notes ahead of the third quarter earnings from Netflix.
A potential risk, reward on Netflix shares may be improving, according to Truist analyst Matthew Thornton.
The analyst, who has a Hold rating and $430 price target on shares, said second-half expectations for Netflix are "reasonable."
"With the sector hyper-competitive (in our view), the question is what levers NFLX can pull to drive incremental growth and interest," Thornton said.
The analyst sees subscriber adds improving in the future, along with potential competitor consolidation and bundling.
Key aspects the analyst is watching for the third quarter include password sharing, advertising, margins, video games, sports and artificial intelligence.
UBS analyst John Hodulik lowered the price target on Netflix from $525 to $500 and kept a Buy rating ahead of the third quarter earnings report.
"For 3Q, we expect flat ARPU...given limited price increases but expect growth to accelerate next year as accretion from paid sharing builds & new price ups are likely implemented," Hodulik said.
The analyst said Netflix will likely report six million new net paid subscribers in the third quarter.
Here's a look at other recent analyst ratings and price target activity:
Benchmark: Sell, $325
Wolfe Research: Downgrade from Outperform to Peer Perform, no price target
Piper Sandler: Neutral, price target lowered from $440 to $400
Morgan Stanley: Equal-weight, price target lowered from $450 to $430
Goldman Sachs: Neutral, price target lowered from $400 to $390
Key Items to Watch: There are various factors that investors and analysts will be paying attention to when Netflix reports financial results and hosts its conference call.
There has been chatter that Netflix could be increasing its prices for subscribers in 2024. The rumor popped up as a potential for the streaming giant in the wake of the anticipated end of the Hollywood strike.
Analysts were mixed on a possible price increase, as the company has already cracked down on password sharing and launched ad-supported plans in a push for more subscribers.
Video games could be a big topic for Netflix in its new earnings report. The company was rumored to be exploring video games dating back to 2021 and has since launched several mobile games available for subscribers.
Netflix has launched a limited beta test in Canada and the United Kingdom to test its video games on PCs, TVs and through the Netflix.com website.
According to reports, Netflix is also looking to release more games based on several of its hit franchises like "Squid Game," "Extraction," "Wednesday" and "Black Mirror." The streaming company has previously released games based on its series like "Queen's Gambit," "Love is Blind," and "Stranger Things."
Netflix has also held discussions with Take-Two Interactive Software (NASDAQ: TTWO) about licensing a game from the popular "Grand Theft Auto" franchise. No additional details were shared on a potential Netflix GTA game, but this could be a huge development given the popularity of "Grand Theft Auto V" and the upcoming highly anticipated "Grand Theft Auto VI" release.
Questions about video games will likely come up during the company's conference call.
Another key item to watch will be the upcoming content slate for the fourth quarter.
The company will release its first venture into live sports on Nov. 14 with "The Netflix Cup" at 6 p.m. ET. The live golf competition will feature PGA Tour golfers and Formula 1 drivers competing against each other.
The show could be an early test of Netflix's potential in the live sports arena and if the demand from subscribers could support acquiring media rights to live sports in the future.
Netflix will also release "Squid Game: The Challenge" on Nov. 22, during the Thanksgiving Day week. The 10-episode reality show features 456 contestants who compete in challenges drawn from the record-breaking series.
The competition will award a $4.56 million cash prize to the winner and could attract new viewers to the "Squid Game" franchise, which has a second season coming in the future for Netflix.
NFLX Price Action: Netflix shares traded at $354.88 Tuesday, versus a 52-week trading range of $231.73 to $485. Shares are up 46% in the last year and up 21% year-to-date in 2023.
Shares of Netflix traded over $460 after second-quarter results were reported in July and have fallen since.