Netflix plans to stop reporting on the number of subscribers. For now, sports are expected to offer a potential boost when the company releases its fourth-quarter results this Tuesday afternoon. The entertainment company’s stock climbs 2% before the start of trading in Wall Streetwhich has its correlation in the Cedear of the firm listed in Plaza Buenos Aires.
It’s the end of an era for Netflix, as it will stop releasing quarterly subscriber updates after its fourth-quarter report, which is due out Tuesday afternoon.
It’s worth remembering that Netflix stock tends to react to subscriber numbers, and this time, the potential to beat expectations could depend on one factor: sports. The company has been making a bigger push into live sports programming, and during the fourth quarter it had some key events, including the NFL’s holiday programming and the Jake Paul-Mike Tyson fight.
What the market expects for the Netflix role
The Rosenblatt Securities analyst believes this could boost subscriber indicators in the last period.
However, there is a downside: those who tuned into these sporting events might not be loyal subscribers. Netflix is betting on sports in hopes of attracting new viewers and getting them to stay, but Crockett notes there is “some risk” for the first quarter if some sports subscribers quickly cancel their memberships.
Sports are important beyond their impact on subscribers, he continued. The company’s guidance forecasts revenue of $10.128 billion for the fourth quarter, an increase of $303 million over what it reported in the third quarter. “But there are factors that suggest this could be surpassed,” he wrote, given the advertising revenue from the two soccer games and the company’s comment about selling out all slots for those games.
This also increases the pressure for the first quarter. “Advertising revenue from the new WWE Raw is probably a fraction of that of the NFL Christmas,” Crockett said in his report to clients. This could make it difficult for Netflix to achieve the $400 million of sequential revenue growth implied by consensus estimates, and Netflix’s guidance could reflect that.
“CAt Netflix, changes in revenue tend to pass directly to operating profits” Crockett wrote.
Macquarie’s Tim Nollen will also be looking at the impact of sports on Netflix’s business. “We hope that live events become a big driver of [adquisición] and subscriber retention, with concurrent costs,” he wrote.
By his estimates, Netflix likely made money from its NFL appearance, and he and his team “are optimistic that even as content costs increase, it will still achieve a 30% operating margin in 2027.”
With subscriber numbers disappearing, Netflix management is expected to emphasize the metrics that will be most important to the investment story going forward. “The focus now shifts to better ad-level monetization, with likely expansion of live sports and price increases driving revenue and profits,” Nollen said in his report.
For the fourth quarter, analysts tracked by FactSet expect $10.112 billion in revenue, up from $8.833 billion a year earlier, with earnings per share of $4.21, essentially double that of last year. Analysts also model $9.77 million in paid net additions.
Looking to the first quarter of 2025, analysts expect revenues of $10.49 billion and earnings per share of $5.97.
Nollen sees price increases in the US as “imminent” for Netflix, and believes the company could weather them quite well from a cancellation perspective. “Many streaming platforms raised their prices in 2024, including Max, Paramount+ (both owned by Paramount), Peacock (owned by Comcast), and Disney (owned by Disney), and still saw subscriber growth throughout the year,” according to Nollen. Additionally, subscribers could choose to upgrade to the ad tier if they didn’t want to pay a higher membership fee.
Source: Ambito
