Netflix Q4 Earnings Coming Up: Time to Buy, Sell or Hold the Stock?

Netflix NFLX is slated to report fourth-quarter 2024 results on Jan. 21. For the fourth quarter of 2024, Netflix forecasts revenues to increase 15%, which equates to 17% growth on an F/X-neutral basis. The company anticipates total revenues to be $10.12 billion, suggesting growth of 14.7% year over year. The consensus mark for revenues is pinned at $10.12 billion, in line with the company’s expectations.NFLX has projected earnings of $4.23 per share. The Zacks Consensus Estimate for the same is pegged at $4.19 per share, currently lower than the company’s expectations. The estimate has moved south by 0.5% over the past 30 days. Find the latest earnings estimates and surprises on Zacks Earnings Calendar.The company’s fourth-quarter results are expected to benefit from its diversified content portfolio, which involves heavy investments in the production and distribution of localized and foreign-language content.NFLX Estimate MovementImage Source: Zacks Investment ResearchEarnings Surprise HistoryIn the last reported quarter, the company delivered an earnings surprise of 6.09%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average negative surprise being 5.73%.Netflix, Inc. Price and EPS Surprise Netflix, Inc. price-eps-surprise | Netflix, Inc. QuoteEarnings WhispersOur proven model predicts an earnings beat for Netflix this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.NFLX has an Earnings ESP of +0.19% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Shaping Upcoming ResultsNetflix expects paid net additions to be higher sequentially in the fourth quarter due to normal seasonality and a strong content slate. In the fourth quarter, the company released hit returning series Squid Game S2, Outer Banks S4 and Love is Blind S7, as well as new dramas like Black Doves from the United Kingdom and comedies like No Good Deed and Man on The Inside. In Latin America, the company had two of the biggest shows ever made in the region premiering in winter, namely 100 Years of Solitude (based on the iconic novel by Gabriel García Márquez from Colombia) and Senna (a biopic about one of the greatest Formula 1 drivers of all time from Brazil). Netflix’s unscripted offerings included Aaron Rodgers: Enigma, which chronicles the life and career of the NFL legend, and the second season of the music competition series Rhythm + Flow. The company’s film rollouts included action-thriller Carry-On, war drama The Six Triple Eight and Spellbound produced by John Lasseter.The company projects its fourth-quarter operating margin of 22%, indicating an improvement of five percentage points year over year.The company's growing games portfolio, featuring popular titles like Grand Theft Auto: The Trilogy, is likely to have enhanced user engagement and attracted new subscribers. In the second quarter, the company added Virgin River and Perfect Match to its gaming roster. This diversification into gaming demonstrates Netflix's commitment to providing a comprehensive entertainment experience.Despite these positive factors, Netflix has been facing significant challenges in an increasingly competitive streaming landscape. The company contends with robust rivals, such as Disney’s DIS Disney+, HBO Max, Peacock, Paramount+, Apple’s AAPL Apple TV+ and Amazon's AMZN Prime Video services. Additionally, Netflix competes for consumer attention against traditional linear TV, YouTube, short-form content platforms like TikTok and the gaming industry.Top-Line Growth Estimates for Q4The Zacks Consensus Estimate for paid total streaming net membership additions is pegged at 9.11 million. The consensus mark for fourth-quarter 2024 Asia-Pacific revenues is pegged at $1.15 billion, indicating 20.4% growth from the figure reported in the year-ago quarter.The Zacks Consensus Estimate for Latin America revenues is pegged at $1.23 billion, suggesting a rise of 7% from the figure reported in the previous quarter.Moreover, the consensus mark for EMEA revenues is pegged at $3.21 billion, suggesting an increase of 15.5% from the figure reported in the year-ago quarter.The Zacks Consensus Estimate for the United States and Canada revenues is pegged at $4.49 billion, indicating a 14.2% rise from the figure reported in the year-ago quarter.Price Performance & ValuationShares of Netflix have surged 76.8% in the past year compared with the Zacks Consumer Discretionary sector, Apple, Amazon and Disney’s return of 13.4%, 21.9%, 47.2% and 16.1%, respectively.Netflix Outperforms Sector, PeersImage Source: Zacks Investment ResearchNow, let’s look at the value Netflix offers investors at current levels. Currently, NFLX is trading at 36.31X forward 12 months earnings, above its five-year median of 33.82X. Meanwhile, the Zacks Broadcast Radio and Television industry’s forward earnings multiple sits at 26.32X. The company’s valuation looks somewhat stretched compared with its range and the industry average.Price-to-Earnings (Forward 12 Months)Image Source: Zacks Investment ResearchInvestment Considerations: Balancing Risk and RewardNetflix presents a balanced investment case heading into fourth-quarter 2024. The company projects higher sequential subscriber additions, supported by a diverse content slate, including Squid Game S2, 100 Years of Solitude and Senna. Strategic expansion into gaming with Grand Theft Auto: The Trilogy and an expected operating margin improvement to 22% demonstrate operational strength. However, fierce competition from Disney+, HBO Max, Apple TV+ and Amazon Prime Video, alongside challenges from traditional TV, YouTube and TikTok, creates a complex landscape. Netflix's content production capabilities provide advantages, but market competition warrants careful consideration.ConclusionInvestors may benefit from holding existing positions or awaiting a more attractive entry point ahead of fourth-quarter earnings. While the company's robust content slate and projected margin expansion to 22% signal operational strength, these positive catalysts appear largely priced into the stock. The heightened competition in the streaming space and Netflix's significant outperformance against peers like Apple, Amazon and Disney suggest limited near-term upside potential. Prudent investors should monitor fourth-quarter execution, particularly subscriber growth trends and content performance, before increasing exposure to the stock.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report The Walt Disney Company (DIS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks