(Boursier.com) — netflix fell 8.1% last night after trading on Wall Street. The streaming giant nevertheless posted strong growth in its subscriptions over the quarter, against the backdrop of the fight against password sharing, but the outlook was disappointing. In detail, quarterly earnings per share were robust at $3.29, compared to a FactSet consensus of $2.85. It exceeds even the highest expectations of the place. Turnover amounted to 8.19 billion dollars, against 8.29 billion consensus. For its third quarter, the group is planning revenues of around $8.52 billion, against the FactSet consensus of $8.66 billion. Operating profit is expected at $1.89 billion, which would exceed market expectations. Earnings per share are expected at $3.52, above expectations. Net new subscriptions for the quarter are expected to be comparable to the prior period. Finally, for the fiscal year, the group still expects an operating margin ranging from 18 to 20%.
Net new streaming paid subscriptions were 5.89 million in the second quarter. Netflix increased its subscriber base by 8%, but sales only increased by 2.7%. This was partly due to exchange rates and price declines in some markets. Netflix also generated less revenue per customer in the last quarter. Netflix executives say it will take several quarters to realize the financial benefits of paid sharing. “While we have made steady progress this year, we still have work to do to re-accelerate our growth,” the company wrote in a letter to shareholders. The management nevertheless evokes increased confidence in its financial outlook, anticipating an acceleration of growth in the second half, with the increase in monetization of the recent launch of paid sharing and the progression of offers supported by advertising. “We expect revenue growth to accelerate more significantly in Q4 2023 as we further monetize account sharing between households and steadily increase our advertising revenue.
“Our primary goal is to improve the advertising experience for members and advertisers,” says Netflix, which is partnering with Nielsen and EDO to improve measurement and innovate for advertisers. “We are confident that over time, we can develop advertising into an additional multi-billion dollar revenue stream,” the group further assesses. “In Q1, we lowered prices in a number of less-penetrated markets, and in Q2, we phased out our Ad-Free Basic Plan for new and re-enrolling members in Canada (existing Ad-Free Basic Plan members are unaffected). We are now doing the same in the US and UK” (…) “As of today, we will begin to address account sharing between households in almost all of our remaining countries. In these markets, we do not offer an additional member option as we have recently reduced prices in many of these countries and penetration is still relatively low in many of them.”
Assuming no major currency fluctuations, the group now forecasts at least $5 billion in free cash flow for 2023, up from the previous estimate of at least $3.5 billion. The updated expectations reflect lower content spending in 2023 than originally expected due to the timing of production start-ups and the ongoing WGA and SAG-AFTRA strikes. The group expects to generate substantial positive free cash flow in 2024, with a cash content expense to content amortization ratio of around 1.1x. During the quarter, Netflix repurchased 1.8 million shares for $645 million. It now has $3.4 billion of capacity left under the $5 billion share buyback authorization. Netflix expects to increase its share buyback activity in the second half of 2023, assuming there are no material changes to its business.
In short, as in the case of You’re herethe results are good, but insufficient to justify a continued rise in the stock for the time being, while prices have more than doubled over one year.