Investors are anticipating possible price increases as shares trade near all-time highs

Netflix (NFLX) is expected to report its fiscal third-quarter earnings after the market close on Thursday – but the streamer faces another steep hurdle as the stock trades near all-time highs and analysts anticipate another potential price hike announcement Catalyst.

For the full year 2024, analysts surveyed by Bloomberg expect earnings of around $19 per share, with earnings per share in 2025 at just under $23.

According to Bloomberg consensus estimates, Wall Street expects the following for the third quarter:

• Revenue: $9.78 billion (Netflix forecast: $9.73 billion) versus $8.54 billion in Q3 2023

• Earnings per share: $5.16 (Netflix forecast: $5.10) vs. $3.73 in Q3 2023

• Net subscriber increases: 4.5 million compared to 8.8 million in the third quarter of 2023

Investors have praised the company’s move into sports and live events. Meanwhile, ad tier continues to gain importance. As a result, shares soared, with the stock up about 45% since the start of the year.

Last week, the stock hit another record close, ending the day at around $730 per share. Shares have fallen slightly and are trading closer to $705.

But the recent surge has caused some concern on Wall Street.

The company recently revealed as part of its latest semi-annual viewership report that subscribers watched over 94 billion hours on the platform from January to June, although engagement levels remained roughly flat year-over-year – a potential headwind when it comes to pricing power has become particularly important for streaming companies as consumers become increasingly choosy.

According to Deloitte’s latest Digital Media Trends report, U.S. consumers on average subscribe to four streaming services and spend about $61 per month. Retaining loyal subscribers over the long term is challenging as consumers churn or cancel their subscription plans.

Netflix last increased the price of its Standard plan in January 2022, increasing the monthly cost from $13.99 to $15.49. At the same time, the price of the Premium tier was increased by $2 to $19.99 per month; The company increased the cost of this plan again in October to $22.99.

The company has not yet increased the price of its ad-supported offering, launched less than two years ago, which remains one of the cheapest advertising plans among all major streaming providers at $6.99 per month.

“Given Netflix’s low cost per hour viewed, we see room for the company to increase U.S. prices by 12% in 2025,” said Citi analyst Jason Bazinet.

Aside from a possible price hike, updates to the company’s fledgling advertising business will also be top of mind for investors. Last quarter, Netflix announced that it had secured “an increase in upfront advertising sales commitments of more than 150% throughout 2023.”

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The platform is also focusing on live sports, doubling down on its biggest shows.

Upcoming films and series such as “Happy Gilmore 2” and “Squid Game 2” as well as the recent acquisition of live sports content such as the NFL Christmas Day games and WWE Raw, which will launch in January 2024, contributed to the success of the company.

Netflix has previously said its goal is to make advertising “a more substantial source of revenue, contributing to sustainable, healthy revenue growth in 2025 and beyond.” As a result, the lowest-priced ad-free streaming plan will be phased out, making the $15.49 Standard plan the cheapest offering for an ad-free experience.

“We believe the introduction of the advertising tier provides Netflix with another lever to maximize revenue – its North Star,” Morgan Stanley analyst Ben Swinburne wrote in his earnings call.

He added that Hollywood’s “new normal,” in which competition for content is less intense and more studios are opting for licensing deals, naturally “favors Netflix.” He reiterated his Overweight rating and raised his price target on shares to $820 from $780 previously.

“After this volatile period of media disruption, Netflix has taken on a leadership position that few would have predicted almost a decade ago,” he said.

Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at [email protected].

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