Netflix crushed expectations for subscriber growth in the third quarter but the streaming giant sprang a less-heralded surprise, according to Barron's Daily.
The company will no longer provide guidance for paid subscriber numbers from the first quarter of 2023. It’s a blow for transparency, making things harder for retail and institutional investors alike, writes Callum Keown.
Of course, Wall Street may still try to infer the numbers based on revenue guidance, which will remain, but without the company’s own guidance it becomes difficult.
With investors somewhat obsessed with the metric when it comes to the increasingly competitive streaming sector, its absence could lead to more surprises.
That being said, Netflix’s own forecast of 1 million net new subscribers in the third quarter was way off the mark, and the actual figure of 2.4 million helped the stock surge after-hours. The relief among investors, after two quarters of losing subscribers, was palpable.
Netflix says revenue is now the most important metric, given its new advertising model, hence the decision to ax subscriber guidance.
But maybe it also reflects the uncertainty looming over forward guidance this earnings season. Earnings have generally come in better than expected so far, but the average stock price reaction after a company beats on sale and earnings is down 0.4%, according to Evercore.
Corporate America is finding it difficult to discuss the months ahead with any sort of confidence, given macroeconomic conditions, weakening demand, decades-high inflation and the rising probability of recession.
Netflix, which is launching its cheaper ad-supported tier next month, may ultimately be wise to ditch the guidance. Its 4.5 million net new subscribers forecast for the fourth quarter seems bold.
No comments:
Post a Comment