Netflix reverses losses and provides bullish outlook to Wall Street - 'Far from over'
The streaming service has seen its shares surge by 14 percent as it forecast that it would gain 4.5 million new subscribers in the fourth business quarter.
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The US giant was able to reassure Wall Street as it prepares to offer a new streaming option with advertising. From July to September Netflix attracted 2.4 million new subscribers worldwide which is more than double what Wall Street had predicted.
It comes after the company's stock had fallen nearly 60 percent this year before the latest positive earnings report.
Investing.com analyst Haris Anwar commented that “Netflix’s impressive numbers show the company’s growth story is far from over.”
The California based streaming giant was boosted in the third quarter by hit shows such as cult Sci-fi series 'Stranger Things'.
Serial killer series 'Dahmer – Monster: The Jeffrey Dahmer Story', has also become one of the most watched Netflix shows of all time.
Netflix Q3 revenues were up 5.9% over the prior year, the slowest growth rate in company history. Its stock was down 61% in the last year heading into earnings and is currently up 14% in after hours trading. $NFLX pic.twitter.com/kPtPPf5f5B
— Charlie Bilello (@charliebilello) October 18, 2022
Netflix is working to kick-start membership growth after a sudden decline earlier this year.
Amongst a difficult world economy and growing competition for online video viewers the company's subscription base declined by 1.2 million.
However, Netflix now has 223.1 million subscribers around the world.
In the United States most established competitors have stopped growing as the market has reached maturity.
Netflix added 2.4 million subscribers during the third quarter, marking a major turnaround for the streaming giant that has been plagued by declining growth during the past year https://t.co/rBLbj3B3Jc pic.twitter.com/o761TqOo6V
— The Hollywood Reporter (@THR) October 18, 2022
In one page Netflix is saying this: $NFLX
— Sean D. Emory (@_SeanDavid) October 18, 2022
1. WE KNOW HOW TO EXECUTE
“We are more profitable than any other streaming platform.”
2. WE ARE BETTER
Netflix has higher engagement than any other streamer”
3. WE HAVE ROOM TO GROW
“we’re on a path to reaccelerate growth.” pic.twitter.com/R44jF6uaZy
Although new entrants, such as Paramount Global’s Paramont+, are picking up new viewers due to live sports programming.
In a quarterly letter to shareholders, Netflix said that rival media companies are losing money from streaming as they try to attract viewers.
They said: “Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard.”
The streaming giant estimated that competitors would end 2022 with combined operating losses of “well over $10billion,” while Netflix would enjoy an annual operating profit of $5billion to $6billion.
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NETFLIX Q3 EARNINGS
— Azeem Sheriff (@Azeem__Sheriff) October 18, 2022
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-Netflix Sees 4Q Rev. $7.78B, EST. $7.98B
-Netflix 3Q Streaming Paid Net Change +2.41M, EST. +1M
-Netflix Won’t Provide Paid Membership Forecast Starting in 4Q
-NETFLIX STOCK SOARS 14% AS Q3 SUBSCRIBER GROWTH TOPS EXPECTATIONS$NFLX
Some rivals such as Walt Disney Co run multiple businesses such as TV networks and Theme Parks to offset losses.
Netflix is due to launch a $7-per-month streaming plan with advertising in early November to attract cost-conscious customers.
Rivals such as Disney, Warner Bros Discovery amongst others offer or plan to offer ad-supported options.
PP Foresight analyst Paolo Pescatore said that he thought that some of Netflix's current subscribers will switch to the cheaper plan.
He said: “Some will downgrade or decide to come back to Netflix.
"The move is as much about retaining users as well as signing up new ones.”