Writer's Strike To Weigh On Netflix's Cash Spend But Analyst Says Investors Are Expecting Solid Q4

Piper Sandler analyst Matt Farrell reiterated a Neutral rating on Netflix, Inc NFLX, raising the price target to $475 from $400. 

The streaming giant said it would post its fourth-quarter results on Tuesday, January 23, 2024. 

Farrell writes that expectations heading into the fourth quarter print “couldn’t feel more different” than set-up into the third quarter print in mid-October. However, the stock has rallied nearly 40% over the last few months.

The analyst adds that the stock rally indicated that investors are expecting a solid print across the board.

According to Farrell, global paid net adds in the fourth quarter are expected to be “similar to Q3 levels,” plus or minus a few million.

In the quarter to be reported, global ARM is expected to be flat year-over-year due to the limited price increases over the last several quarters, the analyst writes.

Management expects revenue of roughly $8.7 billion in Q4 2023, up 11% year-over-year. The company sees a fiscal 2024 operating margin of 22% to 23%. The guidance assumes a roughly $200 million FX headwind, Farrell adds.

Per the analyst, 2024 cash content spend is expected to be roughly $17 billion, up significantly from $13 billion in 2023 due to the strike impact.

With the strikes behind, the analyst said that he is trying to understand a change in strategy on ramping back up content spend and/or marketing dollars by the firm.  

The analyst expects the company to report revenues of $38.161 billion in FY24.

Price Action: NFLX shares are trading higher by 0.67% to $483.57 on the last check Thursday.