Latest news with #MelissaOtto
Mint
5 days ago
- Business
- Mint
Netflix looks to keep up its hot streak in the second quarter
When Netflix reports its second quarter on Thursday afternoon, the Ginny & Georgia streamer will look to keep up a hot streak that began at the end of 2023. Wall Street analysts are expecting earnings per share of $7.08, up from $4.88 last year, and revenue of $11.1 billion, up 16%. After its sales growth slowed in 2022, Netflix pulled two levers to turn things around. It cracked down on password-sharing and began offering a less expensive ad-supported tier. The initiatives were successful, and now Netflix has notched six quarters in a row with double-digit revenue growth. The stock price has reflected that, up 129% since Netflix reported the first of those quarters in January 2024. The S&P 500 index was up 28% in the same period. This run has stretched the stock's valuation, trading at 44 times expected earnings for the next 12 months, close to its three-year high. Other valuation metrics are similarly inflated. To keep the rally going, Netflix can't show any weakness in the second quarter, or in its guidance for the third quarter, when analysts expect earnings per share of $6.69 on $11.3 billion in revenue. For Netflix to keep up, the ad tier will have to continue its rapid growth. According to Melissa Otto, the head of visible alpha research at S&P Global, it saw $1.9 billion in 2024 sales and is expected to get $3.9 billion this year, making it an important driver for the whole company. Ads may also be more profitable than subscriptions. The company's operating profit margin has been growing, last seen at 32% in the first quarter, and the streamer projected 33% for this quarter. 'Netflix has built a formidable entertainment platform and is in the early stages of developing a promising digital advertising franchise," said analyst Brian White of Monness, Crespi, Hardt in a note to clients. 'We expect Netflix to enjoy continued momentum on the digital advertising front, benefit from higher monthly subscription prices, and release a steady flow of new content." Netflix has survived an onslaught of new competition in the past few years from Disney, Amazon, Apple and more. According to Nielsen's June U.S. viewing data, Netflix easily tops all but Alphabet's YouTube, whose viewing share has increased from 9.9% a year ago to 12.8% in June, with Netflix trailing with 8.3%. The next closest is the combination of Disney's three streaming services at a 4.8% share. Increasingly, Netflix squares off with YouTube while the rest compete with each other. The wild card is TikTok, which may become a larger part of the picture down the road. Netflix gets a majority of its revenue from abroad, so the weak dollar in the second quarter could be a tailwind.
Business Insider
5 days ago
- Business
- Business Insider
Netflix's price hikes and ad tier will fuel a record quarter, analysts say
Netflix seems poised for a record-setting quarter, even as its crackdown on freeloaders cools off. Wall Street expects Netflix to report a best-ever $11.1 billion in revenue and $7.08 in earnings per share when it shares second-quarter results on Thursday, based on consensus estimates compiled by S&P Global. That would be up from first-quarter marks of $10.5 billion and $6.61, respectively. Analysts think Netflix's primary growth drivers this quarter will be the price increases it implemented earlier this year and its budding advertising tier. That tier drove nearly half of Netflix's subscriber growth in the US in the first five months of 2025, according to data firm Antenna. The fast-growing, cheaper plan is on a strong trajectory and could eventually bring in more revenue per user than the ad-free tier, S&P Global media analyst Melissa Otto told Business Insider. Price hikes and its ad tier have become Netflix's main growth catalysts as its password-sharing clampdown runs its course. The streaming giant shattered its subscriber growth record in 2024 when it stopped people from sharing passwords. It generated 41 million net sign-ups last year, including 18.9 million in the fourth quarter. However, Netflix has likely picked most of that low-hanging fruit. The company no longer shares its subscriber count, though Antenna estimates that its gross monthly additions have leveled off in the US. Its US resubscribe rate has also rebounded, which implies that it's getting fewer first-time sign-ups. "Netflix has largely run out of individuals who were motivated to pay for Netflix for the first time because they lost access via another household's account," Antenna analysts wrote this week. A Netflix spokesperson declined to comment ahead of earnings. Life after the password-sharing crackdown Netflix analysts are confident that the company can keep growing despite the benefits from its password crackdown wearing off. "We continue to view Netflix as well-positioned given the company's unmatched scale in streaming, further runway for subscriber growth, significant opportunities in advertising, and sports/live," Bank of America's Jessica Reif Ehrlich wrote in a mid-July note. Netflix should benefit from a strong second-half content slate that includes new seasons of hits "Wednesday" and "Stranger Things" as well as "Happy Gilmore 2" and a pair of live NFL games on Christmas, Reif Ehrlich wrote. It also has momentum from the new season of "Squid Game." And although Netflix has lost viewership ground to YouTube in the last year, it's still crushing its paid peers. Its viewership share is about as much as Disney+, Hulu, and Amazon Prime Video combined. "The viewership data has been strong, suggesting that engagement's good," UBS media analyst John Hodulik told BI. He added that this means cancellations should remain low. Games could be another growth lever. Netflix hasn't mastered gaming yet, but many of its rivals aren't even trying. "No one's really cracked the code on the streaming gaming, and it would seem that Netflix may be in a great position for that," Otto said.
