Netflix Inc (NASDAQ:NFLX) stock rose 15.07% (As on October 19, 11:28:31 AM UTC-4, Source: Google Finance) after the company reported a boost in subscriber growth driven by a password-sharing crackdown efforts and interest in its new ad-supported tier. The streaming giant added 8.76 million global subscribers during the quarter, higher than 5.49 million Wall Street had expected, according to estimates from Street Account. It’s the biggest quarterly net add total for the company since it added 10.1 million subscribers in the second quarter of 2020, when Covid restrictions kept people home. Netflix said that its ad plan membership grew nearly 70% quarter-over-quarter, although it did not disclose what percentage of its base is subscribed to this tier.
Further, the company’s dominance shows in its pricing power. Netflix said it is keeping its ad tier pricing at $6.99 a month in the U.S. while its basic and premium services will see a price hike starting Wednesday. Netflix’s basic plan will now cost $11.99 (up from $9.99) and premium will be $22.99 a month (up from $19.99). Netflix’s standard plan will remain at $15.49 a month.
Moreover, the price increases come as the company seeks to improve its profitability and grapple with higher production costs. As part of its new deal with Hollywood’s writers, Netflix, alongside other members of the Alliance of Motion Picture and Television Producers, have agreed to higher wages and monetary benefits based on streaming popularity. The AMPTP has yet to finish negotiations with striking actors, but expectations are that costs for creating content will rise when a new contract is finalized.
NFLX in the third quarter of FY 23 has reported the adjusted earnings per share of $3.73, beating the analysts’ estimates for the adjusted earnings per share of $3.49, according to LSEG, formerly known as Refinitiv. The company had reported the adjusted revenue of $8.54 billion in the third quarter of FY 23, which is inline with the analysts’ estimates for revenue of $8.54 billion.
The company forecast that revenue will jump 11% in the fourth quarter, reaching $8.69 billion, below Wall Street expectations of $8.77 billion. Netflix said it expects net subscriber adds will be similar to the third quarter. It warned that the strength of the U.S. dollar in recent months will result in a roughly $200 million drag on fourth-quarter revenue. As for Netflix’s profitability, the streamer now expects its full-year 2023 operating margin will be around 20%, the high end of its previous forecast range of 18% to 20%. It also said full-year 2024 should see operating margins of 22% to 23%.