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Could Netflix Stage a Comeback?

Published 02/11/2023, 05:50 am
NFLX
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Netflix (NASDAQ:NFLX)'s stock price grew with a resurgence in user growth, and healthy financials and successful ad tier suggest there's more to come.

Netflix, one of the favorite names on Wall Street, experienced a dramatic decline in its share price in 2021. This downward trajectory extended into 2022 as the company grappled with diminishing subscriber numbers and lackluster earnings reports. However, the tides began to shift toward the end of last year as Netflix witnessed a notable resurgence in subscriber growth, reigniting investor interest and revitalizing the company’s market performance.

Impressive Rebound in Subscriber Growth

This rekindled growth has been reflected in Netflix’s latest earnings report, which showed that the streaming giant added 8.76 million global subscribers in Q3, smashing Wall Street’s estimates of 5.49 million. The figure marked the biggest quarterly net increase since it added 10.1 million subscribers during the pandemic year of 2020.

Additionally, earnings per share (EPS) stood at $3.73 in the third quarter on revenue of $8.54 billion. The reported EPS topped the expectations, while revenue matched them. Netflix also said its ad plan membership soared almost 70% compared to the previous quarter.

As a result of these tailwinds, Netflix’s share price soared more than 40% in 2023, recovering much of the ground lost it lost last year.

Successful Password-sharing Crackdown and Healthy Financials

More recently, new data on Wednesday demonstrates that Netflix is expanding its Q3 momentum. According to Deadline, the company reached a whopping 15 million monthly active users (MAUs) on its ad-supported subscription tier.

This represents a sharp surge from the 5 million MAUs reported last May and builds on the streaming platform’s Q3 report that noted 70% growth in the platform’s ad-supported plan. Netflix launched a $7-per-month ‘Basic with ads’ plan last November in 12 markets, including the US, before expanding globally.

Apart from a strong interest in the ad-supported tier, another factor that helped the company bounce back is the successful execution of its password-sharing crackdown. Since introducing the password-sharing crackdown effort at the end of May, Netflix has added 9 million subscribers on a global level.

Furthermore, Netflix proved it is a financially sound company as well. Its 2023 rally has partly been boosted by its improving profit and cash flow outlook. The company’s operating profit margin is on track to reach 20% of sales this year, at the top of its forecast range.

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This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

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