Netflix upcoming Q2 earnings report is generating anticipation among investors, with analysts predicting a potential windfall resulting from the streaming giant’s crackdown on password-sharing.
Previously, Netflix had turned a blind eye to the widespread practice but has now started monetizing it. UBS analyst John Hodulik believes that paid sharing will drive a revenue increase of over 5% and contribute to the growth of Netflix’s advertising segment.
Hodulik stated, “We see Netflix as the main beneficiary as peers prioritize profits in streaming.” In response to positive data on paid sharing, Hodulik raised his price target on Netflix’s stock from $390 to $525/share and expects the company’s Q3 guidance to reflect accelerated revenue and operating income growth. The recent password-sharing crackdown has already yielded impressive results, with more than 3.5 million new sign-ups in the U.S. alone in June 2023.
Netflix cancellations also rose during this period. The trend signifies a significant surge in subscription additions, the highest since the early months of the COVID-19 pandemic. Analysts predict that Netflix will report revenue of $8.29 billion (up 4% YoY) and earnings per share of $2.85 (down from $3.20 in Q2 2022). Additionally, Wedbush Securities analysts Alicia Reese and Michael Pachter expect Netflix’s paid-sharing program to have a positive impact on the company’s estimates, thanks to its solid uptake.
The additional revenue generated from the “extra member” add-on option, costing $8/month in the U.S., is seen as having minimal incremental cost for Netflix. Deutsche Dank forecasts project substantial revenue growth from Netflix’s paid-sharing plans, estimating $900 million in 2023, $3.4 billion in 2024, and $4.5 billion in 2025. Furthermore.
Hollywood Strike Impact on Netflix Q2 Earnings
Netflix investors will closely monitor the impact of the ongoing Hollywood strike as the company prepares to release its quarterly results. However, analysts believe that Netflix is well-positioned to navigate the situation due to its robust lineup of shows and its international production capabilities.
While striking actors and writers have caused disruptions in the industry, including picketing Netflix offices in Los Angeles, the streaming giant is expected to continue delivering new content such as the highly anticipated “Heart of Stone” starring Gal Gadot and the fifth season of “Too Hot to Handle.” Analysts from SVB MoffettNathanson, Credit Suisse, and Insider Intelligence emphasize that Netflix’s international production capabilities set it apart, as a significant portion of its content originates from countries unaffected by the strike.
The company demonstrated this advantage during the pandemic, attracting subscribers with non-U.S. shows like the French mystery thriller “Lupin” and the comedy “Call My Agent!” Analyst Michael Nathanson from SVB MoffettNathanson highlights that Netflix’s business model is not reliant on struggling sectors like theatrical and broadcast television, further strengthening its position in the market.
