Netflix’s forecast in focus as streaming pioneer set to launch ad-supported tier

By Eva Mathews and Savyata Mishra

(Reuters) – Netflix Inc’s subscriber growth forecast will be in focus when it reports third-quarter results on Tuesday, with the streaming pioneer set to launch an ad-supported plan to better compete with rivals such as Disney+ and HBO Max.

Last week, Netflix said it would launch the plan in November at $6.99 a month, much before its previous estimate of early 2023 and Disney+’s December rollout.

Analysts have said the long-resisted move will boost growth at a time when the market for connected TV advertising is booming.

“As the most-scaled player in the industry, we expect Netflix to garner strong demand from advertisers seeking the service’s reach and younger demographics,” brokerage UBS Equities said.

THE CONTEXT

Netflix has increased prices for its plans and has also been cracking down on password sharing, while focusing on its mobile gaming efforts to maintain growth.

Analysts, polled by Refinitiv, expect Netflix to add a little more than 1 million subscribers in the third quarter. The company behind hits such as “Squid Game” and “The Crown” lost more than 1 million customers in the first half of 2022.

“This (advertisements) is a significant move that takes Netflix in direct competition with free-to-air broadcasters around the world,” PP Foresight analyst Paolo Pescatore said.

“This could prove to be the final nail in the coffin for these players.”

Netflix could generate net U.S/Canada ad revenue of $1.7 billion and international net ad revenue of $1 billion in 2025, according to brokerage MoffettNathanson.

FUNDAMENTALS

* Analysts estimate Netflix’s third-quarter revenue to grow 4.8% to $7.84 billion when it reports results on Oct. 18

* Earnings per share is estimated at $2.13 – Refinitiv

* The stock has lost about 59% of its value this year, but is up 14% since the company reported second-quarter earnings

WALL STREET SENTIMENT

* 13 of 43 analysts rate the stock “buy” or higher, while 24 have a “hold” rating and six rate it “sell” or lower

* The median price target is $240; at the start of 2022, price target on stock was $673.36

* Netflix trading at $245.04

QUARTER ENDING REFINITIV IBES ACTUAL BEAT, MET,

ESTIMATE MISSED

Jun 30 2022 2.94 3.20 Beat

Mar 31 2022 2.89 3.53 Beat

Dec 31 2021 0.82 1.33 Beat

Sep 30 2021 2.56 3.19 Beat

​​Jun 30 2021 3.16 2.97 Missed

Mar 31 2021 2.97 3.75 Beat

Dec 31 2020 1.39 1.19 Missed

Sep 30 2020 2.14 1.74 Missed

(Reporting by Eva Mathews and Savyata Mishra in Bengaluru; Editing by Shounak Dasgupta)