Category: NFLX

Netflix’s Password-Sharing Crackdown May Bolster Stock Performance

Netflix’s strategic crackdown on password sharing, converting freeloaders into paying subscribers, is expected to boost its revenue and positively impact its stock performance.

Staff or Guest writer for The Dog of Wall Street.

2023-05-27 11:30

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In a bold move aimed at curbing the long-standing practice of account sharing, Netflix ($378.88|5.54%) is officially implementing measures against password sharing. The decision, which has garnered significant attention from investors and analysts alike, is expected to propel the company’s stock performance.

With its massive global footprint, Netflix estimated that approximately 100 million people worldwide have been freeloading – using accounts paid for by others. The ubiquitous streaming giant sent a reminder to customers, emphasizing that a Netflix account is for use by one household, albeit usable from multiple locations and devices.

Under the new guidelines, Netflix is set to scrutinize users’ IP addresses to deduce their location at any given moment. This is not intended to gather geographical data for extraneous purposes, but rather to ensure account usage aligns with their household-focused policy. Profiles of those living outside the account holder’s household can be converted into new paid memberships, or users can opt to pay an additional $7.99 per month to maintain them on their account.

Industry analysts have suggested that Netflix’s crackdown on password sharing could set a fresh industry benchmark, with other streaming platforms likely to emulate the approach. Despite some customer backlash, this step could translate into substantial financial gains for the company, as freeloading viewers transition into paying subscribers.

Although customer reactions have been mixed, with some bemoaning the move as “annoying” and “horrible,” others have expressed readiness to pay for individual subscriptions. As one user noted, “some people are just going to be like whatever, I just need to watch Netflix,” indicating the likelihood of a swell in new memberships.

Netflix had previously disclosed to shareholders that similar crackdowns had been triumphant in other markets. For instance, in Canada, the membership base escalated post-crackdown as users established their accounts or added members. This trend further underscores the potential for a hike in Netflix’s revenues and, subsequently, its stock price.

While the overall impact on Netflix’s stock remains to be seen, the move signifies a strategic shift in the company’s approach to managing its extensive user base. If successful, this could provide a model for other subscription-based platforms to follow, potentially reshaping the streaming industry’s monetization strategies.

By implementing such measures, Netflix is not only projecting a firm stance against account sharing but is also illustrating a keen sense of financial prudence. With this, the streaming behemoth shows signs of strengthening its investment allure, likely improving its stock performance in the coming quarters. As the crackdown unfolds, all eyes are on Netflix as it navigates the changing landscape of the digital streaming sector.

Disclaimer: I have no positions in any of the stocks mentioned.
I wrote this article myself, and it expresses my own opinions. I have no business relationship with any
company whose stock is mentioned in this article. All information should be independently verified and
should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Netflix (NFLX 5.54%) has finally done it — it’s begun cracking down on password-sharing in the U.S. and the U.K. And while Wall Street has been anticipating the move for a while, the company has been opaque about exactly when it would clamp down, and what that enforcement would look like.

But now that the streamer has put its flag in the sand, some may question whether Netflix has made a savvy choice. Could it turn out to be a big mistake? Let’s break it down.

The “100 million” issue

After losing millions of subscribers in the first half of fiscal 2022, Netflix decided it was time to deal with the approximately 100 million viewers accessing its content via other people’s login details (also known as “sub accounts”). The company explained that, while subscriber accounts can host multiple profiles, there has been “confusion” among its users, leading to wide-scale account-sharing between households.

Netflix has long known that its customers were freely passing their login details to others, but for years the company framed it as a net positive.

“We love people sharing Netflix,” said founder and chairman Reed Hastings in 2016. “It hasn’t really been a problem,” he proclaimed, suggesting that the practice induces nonpaying viewers to eventually sign up for their own accounts.

Of course, we now know Netflix’s sub-account theory didn’t work as it might have hoped, and so the company has been trying a different strategy — charging subscribers for password-sharing.

Subscriber revolt

In March 2022, Netflix began testing a scheme in several Latin American markets, billing users approximately $2 to $3 extra a month for sharing accounts with other households. The practice caught many customers off-guard, leading to complaints. Despite this, Netflix opted to expand its testing to more countries, only to be met by further resistance.

In September 2022, Netflix introduced sub-account charges in Argentina, where many promised on social media to cancel their accounts. It’s unclear how many ultimately terminated their subscriptions, but the following month, Netflix suspended the pricing trial in Argentina, along with several other Latin American countries.

Clamping down on its biggest markets

Netflix earmarked the first quarter of 2023 to introduce sub-account fees in the U.S. and the U.K. — two of its biggest markets by user penetration. However, the streamer subsequently delayed the plan until Q2, acknowledging it had seen some “initial cancel reaction” in other countries, and therefore wanted to make improvements.

Netflix has now started contacting customers who have sub accounts, informing them of their options: Profiles can be transferred to a stand-alone subscription, or the account holder can pay an extra monthly fee. In the U.S., the cost of each added member is $7.99 per month, while in the U.K. it’s 4.99 pounds (roughly $6.20). Additionally, Standard plan subscribers can only add one member, while Premium customers are capped at two. Subscribers on Netflix’s Standard with Ads or Basic plans cannot add any extra members.

A risky strategy for boosting numbers

The eagle-eyed might note that, at $7.99 a month, the cost of adding an additional member in the U.S. is $1 more than Netflix’s entry-level $6.99 a month Standard with Ads plan. (“Standard with Adverts” is 4.99 pounds a month in the U.K.) Between this and the caps on added members for Netflix’s higher-cost plans, it seems the company is hoping sub-account fees will help drive new sign-ups for lower-cost offerings.

In effect, the streamer may be trying to leverage the crackdown as a way to boost its overall subscriber numbers. Netflix has indicated as much, noting that its delayed clampdown was also about finding a solution that “best serves the long-term business goals.” But there are also notable risks — not least of which is a bigger-than-anticipated “cancel reaction.”

Last year, Aluma Insights published a study that showed 13% of U.S. respondents said they would cancel their Netflix accounts if the company tried to charge them an additional $3 per month for sub accounts. While there’s no knowing how that figure changes now that Netflix has announced extra fees of almost $8 per month, one can speculate that the rate of those saying they’d cancel would probably go up.

To Netflix stakeholders, the company seems to be in a bind: Allowing 100 million non-paying viewers is leaving money on the table, but upsetting customers also has real implications. After all, look at Argentina.

Investors considering what to do may want to hold off until Netflix publishes its next set of numbers. If the streamer manages to offset cancellations with new sign-ups, then it might have hit on the right formula. But if it doesn’t, Netflix may have made a costly mistake.

As the saying goes, “all good things must come to an end.” And that rings true even for our beloved movies on Netflix
NFLX
. As we near the end of May, we’re bidding farewell to a host of quality films that are leaving the streaming service. These aren’t just any movies—they’re a diverse mix of flicks aimed at satisfying a broad range of cinematic tastes. From thrilling sci-fi to heart-wrenching drama, and even a sprinkle of comedy, this article outlines ten top-notch movies you should catch before they disappear.

In this article, I will provide a brief description of each movie, as well as the date they’ll be leaving Netflix. And at the end of the article, you can find a full list of every movie exiting the platform this month. Buckle up for a journey through a landscape of cinematic gems that deserve one last watch.

If you’re interested in reading my weekly-updated movie rankings, check them out here.

Collateral Beauty (2016)

Immerse yourself in the deeply touching narrative of Collateral Beauty, a film that explores profound themes of loss, healing, and redemption. Directed by David Frankel, this emotional journey showcases the talents of a star-studded ensemble, including Will Smith, Edward Norton, and Keira Knightley. They bring to life the story of a New York advertising executive grappling with a personal tragedy. This film’s compelling narrative and powerful performances will captivate you from start to finish.

Your last day to watch Collateral Beauty will be May 27, 2023.

Inception (2010)

Prepare for a rollercoaster ride of mind-bending twists and turns in Christopher Nolan’s Inception. Starring Leonardo DiCaprio, this ambitious sci-fi thriller takes you into the complex world of the human subconscious. DiCaprio excels in his role as a skilled thief who extracts secrets from people’s minds while they dream. The visually stunning sequences and intricate plot make Inception a cinematic masterpiece that will leave you thinking long after the credits roll.

Your last day to watch Inception will be May 31, 2023.

My Girl (1991)

Experience the bittersweet joys and heartaches of growing up in My Girl. This poignant coming-of-age film, directed by Howard Zieff, stars Anna Chlumsky and Macaulay Culkin. It paints a tender picture of a young girl navigating the complexities of adolescence, love, and loss during the summer of 1972. The moving performances and evocative narrative of My Girl make it a timeless classic that resonates with audiences of all ages.

Your last day to watch My Girl will be May 31, 2023.

The Founder (2016)

Dive into the relentless pursuit of the American Dream in The Founder. Directed by John Lee Hancock, this compelling biographical drama stars Michael Keaton as Ray Kroc, a struggling salesman who transformed McDonald’s
MCD
into a global empire. Keaton’s riveting performance and the intriguing narrative reveal the ruthless tactics behind one of the world’s most recognizable brands. The Founder is a testament to ambition, persistence, and the darker sides of success.

Your last day to watch The Founder will be May 31, 2023.

Rango (2011)

Delight in the misadventures of an unlikely hero in Rango. This Academy Award-winning animated film, directed by Gore Verbinski, features the voice of Johnny Depp. It follows a chameleon-turned-sheriff in a lawless desert town, resulting in a hilarious and thrilling journey filled with memorable characters. The creative storytelling and impressive visuals make Rango a treat for all, whether you’re a fan of animation, adventure, or comedy.

Your last day to watch Rango will be May 31, 2023.

Edge of Seventeen (1998)

Relive the trials and triumphs of youth in Edge of Seventeen. This coming-of-age film, directed by David Moreton, stars Chris Stafford as a teenager discovering his sexual identity during the summer of 1984. The film’s heartfelt narrative and empathetic performances provide a sincere exploration of self-discovery and acceptance. Edge of Seventeen is a nostalgic and moving journey that captures the spirit of adolescence with authenticity and grace.

Your last day to watch Edge of Seventeen will be May 31, 2023.

The DUFF (2015)

Burst out laughing with The DUFF, a teen comedy that cleverly dissects high school hierarchies and the concept of self-identity. Directed by Ari Sandel, the film stars Mae Whitman and Robbie Amell. It navigates the tumultuous waters of high school life with humor, heart, and a healthy dose of reality. Its relatable characters, witty dialogue, and insightful commentary make The DUFF a refreshing addition to the teen comedy genre.

Your last day to watch The DUFF will be May 31, 2023.

The Boy (2016)

Plunge into the eerie world of The Boy, a horror film that blends traditional scares with psychological suspense. Directed by William Brent Bell, the film stars Lauren Cohan as a nanny hired to care for a life-size doll that a couple treats as their son. As she starts to suspect the doll might be alive, the film escalates into a chilling tale of terror. With its haunting atmosphere and suspenseful narrative, The Boy will keep you on the edge of your seat.

Your last day to watch The Boy will be May 31, 2023.

The Space Between Us (2017)

Set your sights on the stars with The Space Between Us, an intriguing blend of science fiction and romantic drama. Directed by Peter Chelsom, the film features Asa Butterfield as a boy born on Mars who travels to Earth, experiencing our world in all its wonder and complexity for the first time. His journey of discovery, both of the world and himself, forms the heart of this moving and thought-provoking film. With its unique premise and touching performances, The Space Between Us offers a truly engaging cinematic experience.

Your last day to watch The Space Between Us will be May 31, 2023.

Little Boxes (2016)

Experience a heartfelt exploration of race, identity, and belonging in Little Boxes. This indie drama, directed by Rob Meyer, stars Melanie Lynskey, Nelsan Ellis, and Armani Jackson. It follows a mixed-race family who moves from Brooklyn to a small town in Washington state, confronting personal and societal challenges in their new environment. The film’s sensitive storytelling, compelling performances, and timely themes make Little Boxes a poignant and thought-provoking watch that resonates deeply.

Your last day to watch Little Boxes will be May 31, 2023.

Every movie leaving Netflix in March 2023

Note: The dates mark your final days to watch these movies.

• May 27: Collateral Beauty (2016)
• May 29: The 2nd (2020)
• May 31: 122 (2019); 2 Hearts (2020); B.A. Pass 2 (2017); Barbershop 2: Back in Business (2004); Brahms: The Boy II (2020); Burlesque (2010); Chippa (2020); Conan The Barbarian (1982); Dear My Friends (Season 1); Diary of a Mad Black Woman (2005); Edge of Seventeen (1998); Flushed Away (2006); Galaxy Quest (1999); Hachi: A Dog’s Tale (2009); Inception (2010); Kalek Shanab (2019); Little Boxes (2016); Love.com (2017); Mirai (2018); Monster House (2006); My Girl (1991); My Shy Boss (Season 1); Rango (2011); Spirit: Stallion of the Cimarron (2002); The Alpinist (2020); The Boy (2016); The DUFF (2015); The Founder (2016); The Perfect Dictatorship (2014); The Quick and the Dead (1995); The Space Between Us (2016); The Stolen (2016); Turbo (2013); We Die Young (2019)

Six months after its launch, Netflix Inc.’s ad-supported tier has nearly 5 million monthly active users globally, the streaming giant said Wednesday.

In a virtual upfront presentation to advertisers, Netflix co-Chief Executive Greg Peters said the member base of the ad tier has “more than doubled” since early this year. The ad plan launched in the U.S. in November.

Dive headfirst into the riveting world of cinematic splendor as we unveil the creme de la creme of Netflix’s 2023 film roster. Movie enthusiasts have been spoiled with a dazzling array of compelling narratives, stunning visuals, and poignant performances gracing our screens this year. As we complete the first third of 2023, it’s a perfect time to take stock and reflect on these cinematic gems.

In this article, we will embark on an epic journey, exploring the top ten standout movies (along with a few honorable mentions) that have made a monumental impact on the streaming giant’s platform this year. These films have not only entertained us but challenged us, moved us, and reminded us of the power of storytelling.

If you’re interested in reading my weekly-updated all-time movie rankings, check them out here.

The 10 Best New Movies on Netflix in 2023

Chupa

On a routine family visit to Mexico, young Alex stumbles upon an extraordinary secret: a juvenile chupacabra hidden in his grandfather’s shed. Alongside his adventurous cousins in Chupa, Alex embarks on a thrilling quest to protect this mythical creature, forging an unforgettable bond in the process.

Hunger

In Hunger, Aoy, the heart and soul of her family’s beloved stir-fried noodle restaurant in the enchanting old quarter of Bangkok, is presented with an incredible opportunity. A prestigious invitation from team Hunger, Thailand’s premier luxury chef’s table, led by a renowned culinary maestro, challenges her to step beyond the familiar and embrace the world of high-end cuisine.

The Last Kingdom: Seven Kings Must Die

In the wake of King Edward’s death, a tempest of treachery, invasion, and competing heirs for the crown engulfs England in this Last Kingdom spin-off, Seven Kings Must Die. Amid the chaos, the indomitable Uthred and his valiant comrades endeavour to piece together a united England, battling the odds that history has stacked against them.

Whitney Houston: I Wanna Dance with Somebody

Plucked from obscurity by the discerning eye of music mogul Clive Davis, Whitney Houston ascends to a stratospheric level of fame in the 1980s. The meteoric rise detailed in Whitney Houston: I Wanna Dance with Somebody marks her as one of the most iconic and influential vocalists of her time.

Murder Mystery 2

Nick and Audrey Spitz, once ordinary folk, now run their own private detective agency in Murder Mystery 2. When a friend mysteriously disappears, they find themselves thrust into the heart of an international investigation, forced to navigate a labyrinth of danger and intrigue.

The Magician’s Elephant

Netflix’s animation prowess continues to shine in 2023 with The Magician’s Elephant, a heartwarming tale about an orphaned boy’s quest to find his missing sister, guided by the magic of an enigmatic elephant. Following on the heels of Oscar-nominated hits, this film promises to be another triumphant addition to the Netflix animation roster.

The Magician’s Elephant was directed by Wendy Rogers and stars the voices of Noah Jupe, Mandy Patinkin, Natasia Demetriou, Benedict Wong, Miranda Richardson, and Aasif Mandvi.

Your Place or Mine

Your Place or Mine rekindles the spark of early 2000s romantic comedies, weaving a charming tale of two lifelong friends who discover that they might just be each other’s perfect match. Overflowing with delightful quirks and palpable chemistry, this film is an irresistible ode to friendship and love.

Your Place or Mine was directed by Aline Brosh McKenna and stars Reese Witherspoon, Ashton Kutcher, Jesse Williams, Zoë Chao, Wesley Kimmel, Tig Notaro, and Steve Zahn.

You People

You People takes a humorous yet insightful look at modern racial dynamics in America. From the creative minds of Kenya Barris and Jonah Hill, this comedy follows a couple’s attempt to introduce their diverse parents to their unconventional relationship, resulting in a flurry of awkward, hilarious, and heartwarming moments.

You People was directed by Kenya Barris and stars Jonah Hill, Lauren London, David Duchovny, Nia Long, Julia Louis-Dreyfus, and Eddie Murphy.

The Woman King

The Woman King celebrates the rise of women in action films, showcasing a formidable all-female warrior cast protecting the African kingdom of Dahomey. With pulse-pounding fight scenes and commanding performances, this film reaches new heights, marking a milestone in the representation of fierce, powerful women on screen.

The Woman King was directed by Gina Prince-Bythewood and stars Viola Davis, Thuso Mbedu, Lashana Lynch, Sheila Atim, Hero Fiennes Tiffin, and John Boyega.

The Pale Blue Eye

The Pale Blue Eye merges the allure of fan fiction with the enigma of Edgar Allan Poe, casting Christian Bale as a detective on the trail of a ruthless serial killer. The film unfurls a mesmerizing mystery, as Bale’s character hunts the predator haunting a military academy, leaving a chilling trail of young cadets in their wake.

The Pale Blue Eye was directed by Scott Cooper and stars Christian Bale, Harry Melling, Gillian Anderson, Lucy Boynton, and Robert Duvall.

Honorable Mentions

Here are several other great movies that have been added to the Netflix library in 2023.

• Pamela, a love story – A documentary that details the wild and crazy path of Pamela Anderson’s life and career.
• We Have a Ghost – Netflix’s latest family-friendly feature tells the tale of a family that goes viral after finding Ernest—a ghost living in their new home.
• True Spirit – This dramatic movie out of Australia focuses on Jessica Watson, who set out to become the youngest person to sail around the world alone.
• JUNG_E – This post-apocalyptic Korean sci-fi flick centers on a researcher who leads the effort to end a civil war by cloning the brain of a heroic soldier: her own mother.
• The Raid 2 – A visceral, high-octane Indonesian action thriller, featuring intense martial arts, ruthless gangsters, and an undercover cop’s dangerous journey into the criminal underworld.
• Dog Gone – Rob Lowe is the star of this biopic about a young man who becomes separated from his dog on the Appalachian Trail and goes searching for him.
• Minions: The Rise of Gru – The hilarious origin story of young Gru’s ascent to become the world’s greatest villain, led by his lovable Minion accomplices.
• Furies – This Vietnamese martial arts movie centers on three vigilantes who hunt to take down a rival crime syndicate.
• The Snowman – This mystery thriller starring Michael Fassbender focuses on a damaged detective who follows a trail of dead bodies in Norway.
• Luther: The Fallen Sun – Famous London police detective John Luther (an anti-hero played by Idris Elba) must break out of prison to hunt down a serial killer.

Netflix (NFLX 1.25%) has been one of the defining stocks of the 21st century, rising nearly 27,000% since its IPO. However, the past few years have been a rollercoaster ride for shareholders as the company enters a new business phase. Over the past five years, Netflix’s stock is only up 2%, but within that time frame, it was down as much as 47% and up as high as 120%.

With that kind of volatility, investors might wonder if it’s time to move on from Netflix and place their investment dollars elsewhere. So let’s look at Netflix’s prospects and decide what to do with the stock from there.

Netflix is no longer a growth stock

When the COVID-19 pandemic struck in 2020, Netflix experienced a massive demand boom as people suddenly had nowhere to go. Now that initial impact of the pandemic has dissipated, Netflix has lost a few subscribers but has kept the lion’s share of them. Its global streaming paid memberships rose from 182.9 million to 232.5 million from first-quarter 2020 to Q1 2023. However, its growth has ground to a near-halt, as Netflix only grew its membership count by 4.9% in Q1. That’s not an abnormal slowdown either; 2022 showed almost no growth too.

Data source: Netflix. YOY = Year over year.

With slow membership growth, it’s even harder to grow revenue. With Netflix’s revenue barely squeaking higher at 3.7% in Q1, it doesn’t have much room for expenses to grow. The second quarter doesn’t look any better, as management gave guidance for only 3.4% revenue growth.

This is a problem, as expenses cannot grow faster than its already slow revenue growth, or the company will decrease in profitability. While it was responsible with its operating expenses (they only increased by 2% in Q1), the cost of revenue skyrocketed 13.5%, causing its operating income to fall by 18%.

Netflix is struggling, but to get the full picture it’s necessary to examine how its new business initiatives are going.

Investors got their first look at how Netflix’s cheaper ad-supported tier is performing, and the results were encouraging. In the U.S., the subscription cost plus ad revenue generates more money than the standard plan ($15.49 per month). Additionally, Netflix is seeing a positive result in its crackdown on password sharing in a few of its markets, like Canada, Spain and New Zealand. When this change comes to the U.S. in Q2, Netflix expects a quick cancellation spike, followed by a return to growth shortly after.

However, both initiatives present a problem: They are one-time factors. After Netflix captures what audience is left with a cheaper ad tier and monetizes password sharing, these items don’t contribute anything to growth one year later. As a result, Netflix may see a year of decent revenue growth, but with the company already capturing a vast majority of the market, it won’t stay at those levels for long.

That’s why I think it’s prudent to consider selling here, as this stock has had a massive return in 2023.

But Netflix stock still trades at a growth-like valuation

So far in 2023, Netflix’s stock is up 9% but has gained over 70% since bottoming last May. While the stock is still down over 50% from its all-time high, Netflix may never regain those levels.

Although the company is slowly growing revenue, the stock trades like a growth stock.

NFLX PE Ratio data by YCharts

At 35 times earnings, Netflix is an expensive stock without the growth to show for it. Even if you utilize forward projections, the stock trades at 29 times earnings.

So does that make Netflix’s stock a sell? Not necessarily.

If you believe in the company and think its advertising tier can drive meaningful growth for some time, it could be worth holding on to your shares. However, I’d urge investors to look at past performance to determine if that’s a wise view.

At its premium valuation, the stock is far from a buy. With much better values available in the market and more significant growth prospects, it may be worth trimming some Netflix shares to purchase those stocks, as they can likely provide greater upside than what Netflix can in its current state.

Netflix (NFLX Quick QuoteNFLX – Free Report) has recently been on Zacks.com’s list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future.

Over the past month, shares of this internet video service have returned -3.3%, compared to the Zacks S&P 500 composite’s +2.2% change. During this period, the Zacks Broadcast Radio and Television industry, which Netflix falls in, has lost 3.2%. The key question now is: What could be the stock’s future direction?

While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Netflix is expected to post earnings of $2.79 per share, indicating a change of -12.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.2% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $11.12 points to a change of +11.8% from the prior year. Over the last 30 days, this estimate has changed -1.4%.

For the next fiscal year, the consensus earnings estimate of $14.42 indicates a change of +29.7% from what Netflix is expected to report a year ago. Over the past month, the estimate has changed +1%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Netflix is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:

12 Month EPS

Revenue Growth Forecast

While earnings growth is arguably the most superior indicator of a company’s financial health, nothing happens as such if a business isn’t able to grow its revenues. After all, it’s nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it’s important to know a company’s potential revenue growth.

For Netflix, the consensus sales estimate for the current quarter of $8.25 billion indicates a year-over-year change of +3.5%. For the current and next fiscal years, $33.77 billion and $37.79 billion estimates indicate +6.8% and +11.9% changes, respectively.

Last Reported Results and Surprise History

Netflix reported revenues of $8.16 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $2.88 for the same period compares with $3.53 a year ago.

Compared to the Zacks Consensus Estimate of $8.18 billion, the reported revenues represent a surprise of -0.25%. The EPS surprise was +1.77%.

Over the last four quarters, Netflix surpassed consensus EPS estimates three times. The company topped consensus revenue estimates two times over this period.

Valuation

No investment decision can be efficient without considering a stock’s valuation. Whether a stock’s current price rightly reflects the intrinsic value of the underlying business and the company’s growth prospects is an essential determinant of its future price performance.

While comparing the current values of a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock’s price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Netflix is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Conclusion

The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Netflix. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.