Netflix Faces Expectations Challenge in Earnings Season

Netflix (ticker: NFLX) is set to kick off earnings season for technology stocks this week. As the company continues to pursue its growth and margin ambitions, expectations for immediate benefits from its crackdown on password sharing and advertising-supported streaming might need to be tempered.

Analyst Lowers Target Price but Maintains Buy Rating

UBS analyst John Hodulik recently lowered his target price on Netflix stock from $525 to $500 in a research note. However, Hodulik maintained a Buy rating on the stock despite the adjustment.

Mixed Performance Reflects Investor Disappointment

The Challenges Ahead for Netflix

For the third quarter, experts expect the ARPU to remain flat, primarily due to limited price increases. However, they anticipate that growth will pick up next year as paid sharing gains traction and new price ups are likely implemented. These projections were stated by Hodulik in a recent report.

Netflix last raised its prices for its ad-free service in January 2022. However, reports from The Wall Street Journal suggest that another price increase is on the horizon, possibly after the conclusion of the Hollywood actors’ strike. This news has led analysts at Wolfe Research to downgrade the stock, warning that higher prices could have a negative impact on Netflix’s growth in 2024-25.

Interestingly, consumer-data company HundredX recently reported that consumers may be growing weary of price increases across various streaming services. According to their analysis of customer feedback, streaming prices have become so high that some customers are considering returning to cable providers. The report noted a rise in net favorability ratings for cable TV since May of this year, coinciding with a decrease in favorability towards Netflix and Disney’s Disney+ service due to pricing concerns.

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