Site icon Alpha Edge Investing

DBS: Netflix Inc – Buy Target Price US$447

3Q23 operating income and FY23F guidance are inline

NFLX’s 3Q23 operating income of US$1.9bn (+4.9% q-o-q, +25% y-o-y) met management and street estimates. 3Q23 operating income of US$1.9bn (+4.9% q-o-q, +25% y-o-y) was inline with street expectations. Operating margin in 3Q23 stood at 22.4% (2Q23 margin at 22.3%), inline with street. NFLX’s normalised net income (excluding a US$173m gain from FX remeasurement) stood at US$1.5bn (-0.8% q-o-q, -14% y-o-y), ~4% below street expectation of US$1.6bn, on higher-than-expected net finance cost. NFLX reported revenue of US$8.5bn (+4.3% q-o-q, +7.8% y-o-y), meeting street guidance. Growth in revenue was supported by subscriber addition of 8.8m in 3Q23, beating street expectations of 6.0m addition, growing across all regions. The net addition in 3Q23 was the most in more than two years. NFLX rolls-out another price increase on two of its subscription plans in the US, UK and France. NFLX increased the US price of its premium ad-free plan by US$3 per month to US$22.99. The cost for premium rose by GBP2 to GBP17.99 in the UK and by EUR2 to EUR19.99 in France. Additionally, basic plans with ads are seeing a US$2 increase in the US, GBP1 in the UK and EUR2 in France for existing subscribers. The basic plans are no longer available for new and rejoining subscribers in the US, UK, Italy and Canada. The phasing out of basic plans will take place in Australia, Germany, Spain, Japan, Mexico and Brazil by the end of Oct 2023. The increase in prices and phasing out of basic plans is to lure subscribers to NFLX’s ad-tier plans which includes advertisements, supporting revenue growth. Ads membership in 3Q23 increased 70% q-o-q and now accounts for ~30% of all new sign-ups in NFLX’s 12 ads countries.

NFLX guides 4Q23F revenue of US$8.5bn (+1.9% q-o-q, +11% y-o-y) and FY23F operating margin of 20%, inline with street projection. NFLX has guided US$8.5bn (+1.9% q-o-q, +11% y-o-y) for 4Q23F revenue, translating to a FY23F revenue of US$33.6bn (+6.2% y-o-y), both inline with street expectations. NFLX expects net subscriber addition to be similar to 3Q23. NFLX guides its operating margin upwards from 18%-20% to 20%, which is also inline with street expectations.

Exit mobile version