Netflix Q3 2024: subscriber trends and market implications

When is Netflix's earnings date?

Netflix, the Nasdaq-listed global leader in streaming entertainment, is scheduled to report its third-quarter earnings for 2024 on Friday, 18 October 2024 at 7.00am AEDT. The results will cover the three-month period ending 30 September 2024.

Key financials

Expectations for Q3

• Revenue: $9.764 billion
• Net income: $2.234 billion
• Earnings per share (EPS): $5.11

Comparison to Previous Quarter

In its previous quarter's results, Netflix provided guidance for Q3 2024, forming the basis for many analysts' expectations:

• Revenue growth: 14% year-over-year, or 19% on an FX-neutral basis
• Lower paid net additions compared to Q3 2023
• Roughly flat global Average Revenue per Membership (ARM) year-over-year due to FX headwinds and plan/country mix

These figures will be closely scrutinised by investors, as they reflect the company's ability to grow its top line while managing costs in an increasingly competitive streaming environment.

Highlights of previous quarter

As one of the first major technology companies to report earnings each quarter, Netflix's results are closely watched by investors for insights into consumer spending trends and the health of the streaming industry.

The company typically releases its earnings report after the US market close, followed by a pre-recorded video interview with executives to discuss the results. This format allows for a more in-depth discussion of the company's performance and strategy.

What to watch for

• Subscriber growth: particularly in international markets
• Content spending: and production pipeline
• Impact of password sharing crackdown measures
• Analysts will also be looking for commentary on Netflix's strategic initiatives, such as its expansion into gaming and potential live sports offerings.

Factors influencing Netflix's Q3 2024 performance

Several key factors are likely to influence Netflix's Q3 2024 results:

• Content slate: the strength of Netflix's original content releases during the quarter can significantly impact subscriber growth and engagement
• Global expansion: continued growth in international markets, particularly in Asia-Pacific and Latin America, is crucial for Netflix's long-term success
• Ad-supported tier performance: investors will be keen to see how the lower-priced, ad-supported plan is performing and contributing to revenue growth
• Password sharing crackdown: the impact of Netflix's efforts to monetise shared accounts will be closely watched for its effect on subscriber numbers and revenue.

These factors, combined with broader economic conditions and competitive pressures, will play a crucial role in shaping Netflix's Q4 2024 performance and future outlook.

How to trade Netflix's Q3 2024

Trading Netflix around earnings can be volatile, given the stock's high profile and the market's sensitivity to subscriber numbers.

A Refinitiv poll of 48 analysts maintains a long-term average rating of 'Buy' for Netflix (as of 14 October 2024). The mean price target of $715.38 suggests that the current share price may be slightly above fair value after a stellar run this year, with the stock up 48.45% year-to-date.

Interestingly, IG client sentiment data shows a nearly even split in expectations:

• 51% of IG clients with open positions on Netflix expect the share price to fall in the near term
• 49% expect the price to rise.

This balanced sentiment could indicate uncertainty ahead of the earnings release, potentially setting the stage for increased volatility.

Analyst ratings

IG client sentiment chart

Netflix Q3 2024 results: technical analysis

From a technical perspective, Netflix's long-term trend remains bullish, but short-term indicators suggest caution may be warranted. The stock is currently forming a rising wedge pattern, typically considered a bearish reversal formation when it occurs in an uptrend. This pattern, combined with overbought conditions on momentum indicators, suggests the possibility of a near-term pullback or correction.

Key levels to watch include:

• Resistance: the upper trendline of the rising wedge, currently around $730.
• Support: the lower trendline of the wedge, approximately at $690.
• Key retracement level: $660.25, which could provide support in case of a deeper pullback.

Trend followers might consider waiting for a potential pullback towards the $660.25 level before looking to accumulate shares, aligning with the longer-term uptrend. However, a decisive break above the rising wedge could invalidate the bearish scenario and potentially lead to further gains.