Streaming giant Netflix Inc (NASDAQ:NFLX) is likely to highlight the success of the final season of "Stranger Things" and two Christmas Day NFL games when the company reports fourth-quarter financial results on Tuesday after market close.
One analyst wonders if the uncertainty of a merger with Warner Bros. Discovery (NASDAQ:WBD) could overshadow the results.
Netflix Q4 Earnings Estimates
Analysts expect Netflix to report fourth-quarter revenue of $11.97 billion, up from $10.25 billion in last year's fourth quarter, according to data from Benzinga Pro.
The company has beaten analyst revenue estimates in eight of the last 10 quarters.
Analysts expect Netflix to report fourth-quarter earnings per share of 55 cents, up from 43 cents per share in last year's fourth quarter.
The company has beaten analyst estimates for earnings per share in eight of the last 10 quarters.
Netflix missed both earnings per share and revenue estimates from analysts in the third quarter, posting a rare double miss. The double miss came after posting six straight double beats.
What Netflix Analysts Are Saying
Several analysts have been lowering their price targets on Netflix stock ahead of the fourth quarter financial results.
Rosenblatt analyst Barton Crockett, who has a Neutral rating, kept a $105 price target, but has questions about the timing of the Warner Bros. Discovery merger.
"Netflix's track record is to deliver revenue close to guidance, and operating income somewhat better, and we expect that to continue," Crockett said in a new investor note.
While the results could be favorable for Netflix, Crockett cautions that uncertainty around the Warner Bros. merger could be driving the stock price.
"Settling that uncertainty sooner versus later would be helpful, making reports of a potential shift to an all-cash $72B offer potentially constructive."
With Netflix no longer reporting subscriber figures, Crockett said there could be other areas to watch.
The analyst highlighted Netflix's push into podcasts and a recent global content deal signed with Sony.
Crockett said investors may be fearing a bidding war from Netflix and rival Paramount Skydance (NASDAQ:PSKY) to land Warner Bros.
"For now, Netflix shares we believe will be boxed in by the Warner Bros merger process."
The analyst said he expects Paramount to ultimately win the bidding war, with Netflix potentially constrained to bid more on the company and offer a higher percentage of cash.
Wedbush analyst Alicia Reese sees Netflix reporting subscriber growth and increased average revenue per member, with price hikes and advertising strength helping the higher averages.
"Netflix's low churn rates are significant, particularly for advertisers, driven by the variety, quality, and depth of its content," Reese said.
The analyst maintained an Outperform rating on Netflix and lowered the price target from $150 to $115.
"Our quarterly survey points to steady performance in Q4 and an uptick in Q1."
Stranger Things, NFL Records Among Key Items to Watch
Netflix set new records with the premiere of the fifth and final season of "Stranger Things" in the fourth quarter. The first part of the fifth season had 59.6 million views in its first week, setting the English-language premiere week record.
Other parts of the season released on Dec. 25 and Dec. 31 also helped make the fifth season one of the most watched seasons in Netflix history.
Along with records for "Stranger Things," Netflix also set records with its two NFL games on Christmas Day.
The Detroit Lions and Minnesota Vikings matchup set an NFL U.S. streaming record with an average of 27.5 million viewers. A second game between the Dallas Cowboys and Minnesota Vikings averaged 19.9 million viewers.
A special halftime show from Snoop Dogg during the first game averaged 29 million viewers.
Strong viewership of the live events could be a big catalyst for Netflix as it grows out its advertising business. Live sports remain one of the biggest markets for ads with sports fans tuning into events live, unlike content like shows and movies that they can watch anytime.
The NFL games were watched by Netflix customers in more than 200 countries, which could help the company's international business for both subscribers and for advertising revenue.
Another area to watch could be the company's licensing business with "KPop Demon Hunters" drawing deals earlier this year, along with live experiences with Netflix opening some live interactive exhibits in shopping malls.
Strong subscriber growth and advertising revenue could power Netflix stock higher, with January being a seasonally strong month for the streaming company.
The concerns over the high price proposed to buy Warner Bros. along with the lengthy deal process could remain overhangs on the stock until the issues are resolved.
Netflix Stock Price
Netflix stock is trading at $87.97 on Friday versus a 52-week trading range of $82.11 to $134.12. Netflix shares are up 4.4% over the last 52 weeks.
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