Wall Street Breakfast Podcast: Netflix Expectations

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Netflix (NFLX) expected to post 11% rise in Q4 revenue, focus on ad-supported tier performance. (00:26) SEC unveils new details about its X account hack. (02:14) United Airlines (UAL) rallies after earnings beat, strong full-year guidance. (04:02)

This is an abridged transcript of the podcast.

Netflix (NASDAQ:NFLX) is expected to post an 11% rise in fourth-quarter revenue today, with investors focusing on subscriber growth and the advertising-supported tier.

The company launched its ad-supporter plan in November 2022.

Netflix disclosed earlier this month that it surpassed 23 million ad-supported subscribers, up from 15 million in November.

“Advertising has significant incremental margins,” said Oppenheimer analysts. The analysts also added that it’s possible that Netflix ends the year with 51 million ad-supported subscribers and the sooner it reaches scale in advertising, the faster average revenue per member levels moves higher.

Netflix is expected to add 8.20 million global streaming subscribers for the fourth quarter, according to Evercore, compared to 8.76 million in the preceding quarter.

Along with a crackdown on password sharing, Netflix is also exploring other avenues to grow its revenue. Earlier in October, the company said it is looking at a price increase in the U.S., UK and France.

Wall Street expects Netflix to post revenue of $8.71 billion, thanks to its strong slate of content launches that included Squid Game: The Challenge, new seasons for The Crown and Lupin, Bradley Cooper’s Maestro as well as docuseries Beckham among others.

Earnings per share (EPS) is expected to be $2.23 for the quarter.

Over the last one year, Netflix has beaten EPS estimates 100% of the time and has beaten revenue estimates 50% of the time.

Seeking Alpha and Wall Street analysts are bullish on the stock and see it as a Buy. The stock gained more than 30% in the last year.

However, some analysts believe that subscriber growth might slow down by the second half of the year as the company “laps the benefits of the paid sharing crackdown.”

Citi pointed out that higher cash content costs is another potential risk for the company going forward. The brokerage said that its analysis indicates 2025 cash content spending of closer to ~$20 billion may be more likely.

Seeking Alpha’s Quant rating is also cautious and considers the stock a Hold, with a score of 3.30 out of 5. It is mostly dragged down by its valuation prospect.

The U.S. Securities and Exchange Commission said that a hacker got control of a staffer’s phone number through an apparent ‘SIM swap’ attack earlier this month. They then sent out a fake post on the social media platform X.

This unidentified individual reset the password for the regulator’s X account after gaining control of the SEC employee’s phone number.

The post said that the SEC had approved spot bitcoin exchange-traded funds to trade on U.S. exchanges, triggering a brief spike in the price of bitcoin (BTC-USD). This happened on Jan. 9.

On Jan. 10, the agency actually did greenlight 11 spot bitcoin ETFs, allowing them to start trading on Jan. 11.

The SEC noted that multi-factor authentication of its X account was disabled last July “due to issues accessing the account,” the spokesperson added. The security feature wasn’t re-enabled until after the incident.

The incident is being investigated by several agencies.

On our catalyst watch for the day,

• The three-day TD Securities Global Mining Conference will include participation from Arizona Sonoran Copper Company (OTCQX:ASCUF), Endeavor Group Holdings (EDR), E3 Lithium Limited (ETL:CA), Lithium Royalty Corp. (LIRC:CA), Pan American Silver Corp. (PAAS), Piedmont Lithium (PLL), 10x Genomics (TXG), and Wheaton Precious Metals (WPM).

• Shareholders with EngageSmart (ESMT) will vote on the buyout offer from Vista Equity.

• 8:30 a.m. Procter & Gamble (PG) will hold its earnings call. The update from the consumer staples giant could have widespread sector implications. Analysts have warned that the household products landscape has evolved since P&G raised their organic revenue growth and EPS targets to the high end of the initial range in October. Kimberly-Clark (KMB) is the stock that has correlated the tightest to P&G’s stock on earnings day over the last two years.

An update to our earnings watch on Monday, United Airlines Holdings (NASDAQ:UAL) is up 5.9% in premarket action after beating Q4 estimates and issuing a confident outlook.

United’s premium cabin saw an increase in revenue of 16% for the quarter year-over-year, while its Basic Economy offering again saw a substantial revenue increase of 20% for the quarter year-over-year. United (UAL) said it benefited from cost convergence across the industry.

The company reported passenger revenue growth of 10.9% Y/Y for the quarter. Total operating revenue was up 9.9% Y/Y to $13.6B vs. $13.5B consensus. EPS came in at $2.00 for the holiday quarter vs. $1.69 consensus.

Looking ahead, UAL said it expects full year adjusted EPS of between $9 and $11 vs. $9.48 consensus, although a Q1 loss is anticipated due to the grounding of the Boeing (BA) Max 9.

United Airlines (UAL) has a conference call scheduled for today at 10:30 a.m.

For today, in addition to Netflix (NFLX) reporting after market close, analog chipmaker Texas Instruments (NASDAQ:TXN) is scheduled to report fourth-quarter results also after market close.

Analysts expect a year-over-year decline in both the top and bottom lines, with earnings per share of $1.50 on revenues of $4.14 billion.

The company is expected to report fourth-quarter results in line with analyst expectations and lower first-quarter guidance, due to weakness in its key industrial and automotive markets.

Other articles to look out for on Seeking Alpha:

Wall Street’s worst performing energy stocks of 2024

CAR-T therapies to get boxed warning on blood cancer risk

Western Digital rises after moving to top pick at Morgan Stanley

Wall Street was able to close out the trading session in positive territory on Monday afternoon allowing for the S&P 500 (SP500) to end at a record high for the second session in a row. The Dow (DJI) closed above 38K for the first time ever.

The Nasdaq (COMP.IND) closed higher by 0.3%, while the Dow (DJI) climbed 0.3%, and the S&P 500 (SP500) finished ahead by 0.2%.

Of the 11 S&P sectors, eight rounded out the day in positive territory and were led higher by Industrials and Real Estate. On the flip side, Consumer Discretionary was the worst performer.

Treasury yields finished lower. The 2 Year yield (US2Y) was lower by 1 basis point to 4.37% and the 10 Year yield came down 4 basis points to 4.10%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the green. The Dow is up 0.03%, the S & P 500 is up 0.1% and the Nasdaq is up 0.1%. Crude oil is down 0.8% at more than $74 per barrel. Bitcoin is down 4.5% at less than $39,000.

In the world markets, the FTSE 100 is down a small fraction and the DAX is down 0.04%.

The biggest movers for the day premarket: Coinbase (NASDAQ:COIN) is down 5% after JPMorgan downgraded its rating for the cryptocurrency platform operator’s shares from neutral to underweight.

On today’s economic calendar: