Netflix Inc. (Nasdaq: NFLX) says subscriber growth in the second quarter exceeded expectations by a huge margin. Shares are still down 5.0% in extended trading.
Netflix shares revenue forecasts
The stock is reacting primarily to revenue forecasts, which sidestepped Wall’s estimates.
Netflix expects revenue of $8.52 billion in the third fiscal quarter. By comparison, analysts had $8.66 billion. However, Alex Kantrowitz of Big Technology said on CNBC:Closing bell::
The story of Netflix is that as a company they are taking the right steps to survive and thrive in this economy. I got four of the highest sign-ups in all but one day [wachtwoord delen]. This was huge for them.
In terms of earnings, the streaming giant sees $3.52 per share in the third quarter — better than expected $3.23 per share.
Netflix is beating Street in terms of subscriber growth
Netflix added 5.9 million subscribers in the recently ended quarter. Experts predicted only 1.82 million additions. According to Kantrowitz:
20% of new registrations come through the ad layer. They’re getting some growth from it, and we’ll see them make money on that. It is another additional source of income for Netflix.
The mass media giant has revealed that the ad-supported tier has amassed more than 5.0 million subscribers to date. It also confirmed its plans to expand paid participation to other countries, after its success in more than 100 countries.
More importantly, the California-based company said it will add a similar number of net subscribers in the current quarter as it did in the second quarter. To date, Netflix shares are up over 50% at the time of writing.
Stunning numbers in Netflix’s second-quarter earnings report
- Revenues of $1.49 billion, compared to $1.44 billion a year ago
- Earnings per share increased from $3.20 to $3.29
- Revenue increased 2.7% year-over-year to $8.19 billion
- The consensus was $2.85 per share on $8.29 billion in sales
- Free cash flow increased to $1.3 billion
in Message to shareholders Today, Netflix attributed the strength of the second quarter to the level of advertising and password sharing. Kantrowitz added:
I give the management of Netflix a great deal of credit. As a company, they have implemented the rules of the game perfectly in terms of what to do, where to be and where to go.
Netflix releases free cash flow guidelines
The Nasdaq-listed company also raised its full-year free cash flow forecast to $5.0 billion as it expects to spend less on content in 2023 — in part because Hollywood is currently on strike.
They are in much better shape because they have an impressive inventory of foreign shows and movies. There are a lot of reality TV shows. They can thrive on that while the rest of the competitors figure out what to put on their sites.
On Wednesday, Netflix scrapped its initial plan to stream in the US and UK to lure more users into the ad level.
Wall Street currently has a consensus rating of “plus” on Netflix stock.
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