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Shares of Netflix Inc. (NASDAQ: NFLX ) rose 4% on Friday. The stock has gained 26% over the past three months. The streaming giant posted mixed results for the fourth quarter of 2022 last week, but it was overshadowed by strong subscriber growth as well as some recent changes to the business. Here’s a look at what the company anticipates in the coming year:
Subscription
Netflix says it has a “bumpy but brighter start” in 2022. This is most evident in subscriber growth. After subscriber losses in the first half of the year and a rebound in the third quarter, the company bounced back with a net addition of 7.7 million paid in the fourth quarter of 2022. , that’s way better than the 4.5 million streaming leaders had predicted for the quarter .
Netflix ended the fourth quarter with 231 million paying members, representing 4% growth over the prior-year quarter. For the first quarter of 2023, the company expects positive net paid additions. This compares to a loss of 0.2 million subscribers in the first quarter of 2022. Netflix expects a change in the pattern of net monthly paid additions in 2023 after launching a pay-sharing plan. The net increase paid is anticipated to be higher in the second quarter of 2023 compared to the first quarter.
Advertising supported plans
In November, Netflix launched its low-cost ad-supported plan in 12 countries and the results were encouraging. Audience engagement on the ad-supported plan was consistent with membership on the ad-free plan and was also better than the company expected, meaning the lower price point led to additional membership growth. There is also very little switching from other plans.
Although the company has much work to do in terms of better targeting and measurement, it is pleased with the initial results and believes that the ad-supported plan has strong unit economics, at least in line with or better than comparable advertising. free plan. He also believes that this plan will generate additional profits and gains over time.
Share a paid account
Netflix plans to roll out the paid sharing plan more widely later in Q1 2023. Based on the experience in Latin America, the company expects to see some cancellations in each market once paid sharing is rolled out, which can impact near-term membership growth. But when the borrower household activates its own account and adds extra members, the overall revenue is expected to increase.
Management changes
Netflix CEO Reed Hastings has become Executive Chairman while Greg Peters has moved from the COO position to co-CEO alongside Ted Sarandos.
mixed results
Netflix generated revenue of $7.85 billion in Q4 2022, which is an increase of 1.9% year-on-year and ahead of estimates. However, EPS of $0.12 fell short of expectations. For the first quarter of 2023, the company expects revenue to grow about 4% YoY to $8.1 billion, while EPS is projected to be $2.82.
Click here to read the full transcript of Netflix’s Q4 2022 earnings conference call
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