Reports Q4 2021 results on Thursday 20 January after market close
Expected Revenue: $7.71 Billion
EPS forecast: $0.8454
While video streaming giants struggle to attract new subscribers following the pandemic-driven wave, Netflix's superior content (NASDAQ:) may separate it from the rest.
Fueled by an "unprecedented" slew of new shows after the worldwide hit Squid Game took off in the third quarter, the world's largest paid streaming service predicted the addition of 8.5 million customers in the last three months of 2021. If it stays that way, it will help Netflix stock recover from a disappointing start to the year.
The service added just 5.5 million customers in the first six months of 2021, the fewest since 2013. But following the success of Squid Game last quarter, new seasons of La Casa de Papel and Sex Education may have contributed to a turnaround in the fourth quarter.
Still, this year's impressive content selection hasn't helped Netflix stocks. Shares of the California-based company are down about 16% in the first three weeks of trading as rising bond yields are diminishing the attractiveness of high-growth technology stocks.
Netflix shares closed at $515.86 on Wednesday, about 26.5% lower than their November record high. That weakness, however, is a buying opportunity, according to many analysts. Wall Street's optimism hinges on Netflix's ability to attract new subscribers with best-in-class content, increasing margins and cash flow.
30% Potential Benefit
The average analyst 12-month price target for Netflix stock is $672.71 jumped about 30% from Wednesday's closing price, according to a poll by Investing.com among 44 analysts.
Netflix Consensus Estimates
Chart: Investing.com
Bank of America maintained its buy recommendation for the stock pending the streaming giant's earnings report later in the day. The bank said 2022 should be a better year for the company. His note added:
"We continue to see Netflix's ability to grow as global content investment strengthens its value proposition."
Wells Fargo Securities analyst Steven Cahall is among those who expect Netflix's rally to continue, predicting the stock will hit $800 by the end of the year. Popular content, subscriber growth and margin expansion – the company's longstanding metrics – remain the catalysts for stocks. In a Bloomberg report, he said:
“The content is most of their cost. And so their ability to spend on content and generate new content is what drives these business models.”
Netflix's first price hike since October 2020 is another indication that the company is in a solid position to fund aggressive content creation. The company's standard plan is now $1.50 higher and costs $15.49 in the US.
Bottom Line
the pandemic windfall. In addition, the company's latest hit shows reveal that it is in a strong position to compete in a crowded streaming market and maintain its lead. Today's earnings report could very well prove that point.
