Netflix, Inc. ($NFLX) Earnings (Q3 FY22)

 Netflix, Inc. ($NFLX) Earnings and Opinion:


Netflix is a company in the Communication Services sector and operates in the Entertainment industry. The company provides entertainment services. Netflix was incorporated in 1997 and is headquartered in Los Gatos, California. The company made its debut on the public market in 2002. 

Netflix Earnings Results:

  • Revenue of $7.93B beating expectations of $7.85B
  • Operating Income of $1.58B beating expectations of $1.26B
  • Free Cash Flow of $471.86M beating expectations of $184.21M
  • Diluted EPS of $3.10 beating expectations of $2.12
Opinion:
Netflix is currently soaring in the after hours. The company reported earnings after the market closed this afternoon. This feels like a break-through moment for Netflix after recent quarters showed they were going through a struggle. They are poised for more growth after facing some tough challenges and for the first time ever, having negative subscriber growth. The tide was turned when the report showed the company gained 2.1M subscribers in the past quarter. The company is going to face some struggles with the strength of the dollar, which is being overlooked by investors. Netflix is crediting their "bingeable" release model that drives views up. They have seen some success with recent series releases and the Netflix Original productions gaining a lot of viewership. Taking a deeper dive into the financials, we can see that EPS had a really nice beat. The thing that stood out most to me, was the beat they had on the Europe, Middle East, and Africa segment. They beat consensus estimates by 4,390% on streaming paid net change. The Free Cash Flow was also a huge win, and I hope they can continually grow this metric to pick up some smaller streaming names and eliminate some competition. Looking into valuation, the P/E ratio sits high at 56.03. EV/EBITDA sits at 21.11, which is above the median of 17.45. PEG ratio is right in line with the median at 0.97. Overall, I think it is a little overvalued, but it could be a good time to pick it up. In my opinion, you have to love what you see here. I do love the long-term opportunity this stock brings. If they can keep up the streaming efforts they are putting forth, only time will tell when they become the lead streamer. They are in competition with Disney right now, but with the ad-support package coming out next month, it will be interesting to see how much the positions change. Looking into the future a little bit, the password sharing problem is anticipated to be handled starting next year. In honest terms, I see this stock with a little downside going into next year, just because of the strengthing of the dollar and they are anticipating low earnings. However, the long-term potential shows a lot of upside, I am long Netflix $NFLX.

*Information from Bloomberg and Yahoo Finance

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