With Growth Slowing, Is Netflix Stock Still A Buy?

Netflix
NFLX
posted a mixed set of Q1 2023 results on Tuesday, with the company adding about 1.75 million new subscribers, slightly below estimates. While revenue for the quarter rose by 3.7% year-over-year to $8.16 billion, it fell slightly short of estimates, impacted in part by foreign currency-related headwinds. Earnings fell by about 19% versus last year to $2.88 per share due to higher costs and slowing revenue growth. Growth is expected to remain muted in the near term. For the quarter ending June 2023, Netflix is projecting revenue of $8.24 billion (3.4% year-over-year growth) and earnings of $2.82 a share.

Netflix stopped providing specific guidance on subscriber additions since the last quarter, noting that it would be focusing more on boosting its monetization. Now average revenue per member actually declined by 1% year-over-year due to currency headwinds and weaker price realizations, particularly in Asia where the company saw strong subscriber growth in countries with lower plan prices. However, Netflix is looking to better monetize account sharing, expanding the paid password-sharing option that it began testing last year to other markets including the United States during the second quarter. Under the offering, subscribers should have the option to pay an extra fee if they want to share their Netflix account with people they do not live with. Although the company could see some amount of initial subscriber churn due to the rollout, the move should help to eventually boost revenue. Netflix also appeared positive about the performance of its new ad-supported tier which was rolled out late last year in select markets, although it didn’t provide much specific data.