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Netflix Q4 2023 earnings: growth versus margin, key expectations and stock outlook

Discover the key expectations and forecasts for Netflix's Q4 2023 earnings report, including growth momentum, margin pressures, and the potential impact on its stock price.

Source: Bloomberg

When is Netflix reporting?

Netflix (NASDAQ:NFLX) will disclose its Q4 2023 earnings on Wednesday, 24 January at 8am AEDT, post-US market closure.

Netflix earnings key expectations

Source: Netflix

Strong growth momentum

Netflix's Q3 2023 performance was extraordinary, with an 8% revenue growth, reaching a record level. This surge was mainly due to unexpected growth in paid memberships. The global expansion of its streaming services significantly contributed, adding 8.76 million paid memberships in Q3, boosting the total to a record 247 million.

For Q4, Netflix remains optimistic, forecasting an 11% year-over-year revenue increase to $8.7 billion. It expects the addition of paid memberships to be similar to the previous quarter, with potentially 8-9 million new subscribers.

Netflix Q4, 2023 forecast

Source: Netflix

Netflix's cost and margin challenges

Despite a positive outlook, Netflix faces challenges.

Its operating margin is expected to decrease in Q4. After a 22.4% peak in Q3, rising content costs and moderating global ARM (Average Revenue per Membership) could signal a turning point in profitability from Q4 2023.

Citigroup recently downgraded Netflix from "Buy" to "Hold", citing concerns over declining margins. They predict Netflix's content spending will reach $20.4 billion by 2025, questioning its near-term profitability. The company's operating margin may drop to 13% in Q4 from 22% in the previous quarter.

Netflix also noted that a strong US dollar against other currencies could impact its Q4 revenue and ARM by approximately $200 million.

Netflix's volatile stock journey

Before we embark on another year filled with uncertainties in price movements, let's first reflect on Netflix's stock performance in the past.

Over the past three years, Netflix's share price has been incredibly volatile, recording an 11% increase in 2021, a significant 51% decline in 2022, and a substantial 65% gain in 2023. In contrast, the S&P 500 showed a 27% return in 2021, a downturn of 19% in 2022, and a rebound with a 24% increase in 2023. The comparison charts clearly show that Netflix's share price has been more volatile than this key benchmark over the past five years.

Netflix's stock journey

Source: Tradingview

Netflix technical analysis

Currently, Netflix's share price is around the crucial $500 mark, maintaining a clear and valid uptrend since July 2022, with the price trading above all major moving averages. Its impressive performance over the past 18 months has led to an 8 out of 10 rating from TipRanks, backed by 25 buy ratings from 35 global analysts in the last three months.

Netflix weekly chart

Source: IG

Future price movement predictions

In the short term, trend followers might be encouraged by the breakout above the $500 level, signalling strong bullish momentum in line with the longer-term uptrend, and setting their sights on the next target, around $560.

However, it's important to note that the range between $500 and $560 could present a significant challenge due to historical congestion patterns from June 2020 to August 2021, as indicated in the chart.

On the flip side, a drop below the $480-$490 range could potentially signal a risk of correction, as the upward trajectory established since October 2023 would be compromised.

Analyst consensus

Source: IG

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