- Netflix third quarter results beat expectations
- Shares rise in after-hours trading
- Customers are watching the platform for two hours a day, every day, on average
- Fourth quarter content slate could be a big draw
“Netflix is the one thing people can’t live without and its latest results are testament to its lasting appeal,” says Dan Coatsworth, investment analyst at AJ Bell.
“It has beaten third quarter estimates for earnings, revenue and subscribers, and fourth quarter guidance has been upgraded. Investors have rolled out the red carpet and given the shares the star treatment.
“The company had already told the market to expect slower growth in the quarter to September which was a smart move. Management has clearly got the memo about under-promising and over-delivering.
“Households have got used to paying for Netflix alongside their energy bills, rent or mortgage, and all the other big outgoings each month. Many don’t bat an eye at the cost and just see it as one of life’s essentials. It’s an affordable treat that provides a bit of luxury after a long day at work, and many customers are staying loyal.
“Netflix is still suffering from the hangover of the Hollywood strikes which disrupted production on countless shows and films. Theoretically, subscriber numbers could have been even better with some higher profile content added during the quarter but there was still enough to keep people interested.
“Customers are watching its platform for around two hours a day. That’s serious stuff and implies that viewers aren’t flicking between channels like they might do with linear TV. They’re choosing one streaming platform for the night, not going back and forth between Netflix and rivals like Disney Plus and Amazon Prime Video.
“The more ‘must-see’ content added to its platform, the bigger the potential for Netflix to keep growing subscriber numbers. The cheaper-priced plan that carries advertising is a clever move as it’s the right price point to lure more people in and Netflix also scoops up extra income from carrying marketing messages served to viewers.
“Score a big hit with a new TV series or film and Netflix should be able to command premium rates from advertisers eager to push their brand, goods or services during the ad break. It’s no wonder Netflix has moved into sports and live events as these provide additional ‘must-see’ movements that draw in top-dollar advertisers. Subscriber prices are also going up in parts of the world, providing another level to grow profits.
“Major events in boxing and American football are on the slate for the third quarter alongside the new season of Squid Game, an adaptation of One Hundred Years of Solitude and season four of Outer Banks, all big draws which suggest that Netflix could end the year on a high.”
