Netflix Inc. has announced that it will no longer provide quarterly subscriber updates following the release of its fourth-quarter report on Tuesday afternoon, marking the end of an era.
The number of subscribers tends to influence Netflix’s share price, and this time around, sports could be the deciding factor. The corporation has been pushing more into live sports programming, and among of its major events in the fourth quarter included the fight between Mike Tyson and Jake Paul and NFL programming for Christmas. According to an analyst at Rosenblatt Securities, this could boost subscriber metrics in the most recent time frame.
On the other hand, people that watched these sporting events might not end up being loyal subscribers. Crockett points out that there is “some risk” to the first quarter if some sports users abruptly abandon their memberships, despite Netflix’s bet on sports to attract new viewers and retain existing ones.
He went on to say that sports have significance beyond their influence on subscribers. sales for the fourth quarter is expected to reach $10.128 billion, up $303 million from the third quarter’s sales. He stated, “But factors argue that this could be beaten,” considering the two football games’ advertising revenue and the company’s statement that it sold out all of the slots for both games.
See also: As it seeks to increase its subscription base and marketing reach, Netflix expands its live-sports presence with the Women’s World Cup
But this also increases the strain in the first quarter. Crockett wrote in his message to clients, “Ad revenue for the new WWE Raw is probably a fraction of the NFL Christmas.” Because of this, Netflix would find it challenging to meet the $400 million in sequential revenue increase that mainstream projections suggest, and its forecast might reflect that.
“With Netflix, revenue variances tend to flow directly into operating profit,” Crockett stated.
Tim Nollen of Macquarie will also be keeping an eye on how sports affect Netflix’s operations. “We expect live events to become a big driver of [subscriber] addition and retention, with concurrent costs,” he stated.
His team and he “are optimistic that while content costs will rise, it will still push through 30% operating margin in 2027.” He believes Netflix generated money from its NFL performance.
Netflix’s management is anticipated to place more emphasis on the measures that will become increasingly significant to the investment story in the future as subscriber numbers decline. “The focus now shifts to better monetizating the ad tier, with likely live sports expansion and price increases boosting revenue and earnings,” Nollen stated in the report.
FactSet-tracking experts predict $10.112 billion in sales for the fourth quarter, up from $8.833 billion the year before, and $4.21 in earnings per share, which is nearly double the amount from the previous year. Additionally, 9.77 million paid net additions are modeled by analysts.
Analysts anticipate $10.49 billion in revenue and $5.97 earnings per share in the first quarter of 2025.
According to Nollen, price increases for Netflix in the US are “imminent,” and from a churn standpoint, he believes the company could handle them quite well. “Many streamers increased 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,” Nollen stated. Additionally, if members did not want to pay the higher membership cost, they might drop to the advertising tier.
According to FactSet data, at least ten analyst price estimates for Netflix are at or over $1,000, and the company’s shares closed Friday at $858, up 79% over the previous year. In light of this, it’s always worthwhile to observe if Netflix’s management decides to split its stock. In 2024, executives at Chipotle Mexican Grill Inc. (CMG), Nvidia Corp. (NVDA), and a few other well-known businesses with historically high stock values went ahead and split.
