Netflix Earnings Preview: Can Subscriber Growth Continue?

Netflix faces high expectations about subscriber number growth. Can subscriber numbers match expectations?

Maintaining Momentum

Since the start of the year, Netflix's share price has increased almost 30%, setting a tough benchmark to surpass in its upcoming earnings report after the market closes today despite benefiting from comparatively low earnings in Q4. Analyst forecasts see EPS of $4.49, a 56% year-on-year (YOY) growth attributed to improving operating efficiency and pushing revenues to $9.26 billion.

Netflix has seen a notable revival over the past year, primarily due to the successful rollout of ad-supported plans and actions against password sharing. This was seen as supporting subscriber growth, which remained essential amid inflationary pressures, growing 12%. As Netflix no longer provides guidance, the market relies on previous quarters and insights from the CEO's comments.

Growth Versus Sentiment

Investors will likely be interested in further details following the announcement of the partnership with WWE to stream its "Raw" programme. This partnership has proven effective in driving subscribers and symbolises a major step towards live-streaming. The service is scheduled to launch next year but may help propel growth in the interim as a potential template for additional deals.

Stubbornly high inflation and expectations that the Fed will hold interest rates higher for longer and restrict credit could dampen optimism. Netflix has been one of the top-performing tech stocks this year, and any disappointment could have broader implications. Alternatively, if they beat estimates as they did twice previously, it could provide additional optimism about consumer sentiment as individuals would probably be more willing to pay for a Netflix subscription.​

NFLX Reveals Wedge Pattern

Netflix's share price has been consolidating between $600 and $640, with support levels at $580 and $550. A break above the upper range could accelerate the share price towards its all-time high of $700, where a double top formation may emerge. Presently, the share price appears to develop a wedge pattern that may encourage a deeper correction, but this is unlikely to alter the longer-term trend as long as it remains above $500.

Source: SpreadEx / Netflix

Key takeaways

Netflix is due to report its earnings amid high expectations for continued subscriber growth following a successful year. Analysts forecast 13.4% revenue growth to $9.26 billion and EPS of $4.49, up 56% YOY, driven by advertising plans and actions against password sharing. Potential growth areas include details on its new WWE streaming partnership and moves towards live content.​However, macroeconomic headwinds could dampen optimism should Netflix stumble in its earnings, given its significance as a top-performing technology stock.