Netflix (NFLX) Q3 Earnings: Do the Results Support Selling the Stock Now?

TL;DR

Netflix’s Q3 results were financially strong, but the technical chart suggested the stock could consolidate or move lower after its after-hours jump. Revenue exceeded $8.5 billion, global streaming paid memberships grew by more than 10%, and Netflix repurchased $2.5 billion of stock during the quarter. Read on to weigh those operating gains against the chart’s warning signs.

Transcript

what is going on investors hopefully you guys are doing well out there and it is time for Fang earnings we only get this time four times per year and we are going to make the most of it cuz we got Netflix reporting after the Bell today and I tell you what uh these are very very impressive numbers we'll walk through some of the things that maybe wer... Read More

Key Insights

• 💪 Netflix's Q3 earnings showcased impressive revenue growth, strong subscriber growth trends, and increased cash flow.
• 🤨 The company's decision to raise prices for some tiers reflects its confidence in the value and quality it offers compared to competitors.
• ⏳ Despite a significant after-hours stock price increase, the technical chart pattern suggests a possible backtest of the previous trend and potential consolidation or lower prices.
• 🍉 Netflix's focus on reducing shares outstanding and increasing shareholder return through buybacks signals its commitment to long-term growth.
• 🌍 The continued growth in global streaming paid memberships, particularly in the United States, Europe Middle East and Africa, and Asia Pacific regions, is a strong indicator of Netflix's market presence and potential growth opportunities.
• 💪 The company's impressive financial performance, including positive net income and strong operating cash flow, highlights its ability to generate substantial cash and invest in future content creation and subscriber growth.
• 🥶 The increase in full-year 2023 free cash flow guidance showcases Netflix's confidence in sustained growth and its ability to capitalize on future opportunities.

Questions & Answers

Q: Do Netflix’s Q3 earnings support selling NFLX stock now?

The earnings themselves were strong: revenue topped $8.5 billion, paid memberships grew by more than 10%, and operating cash flow approached $2 billion. However, the technical chart had broken an uptrend built over about a year, suggesting a possible backtest, consolidation, or lower prices despite the after-hours gain.

Q: How did Netflix’s revenue perform in Q3?

Netflix reported more than $8.5 billion in Q3 revenue, representing 7% top-line growth. Excluding foreign-currency fluctuations, revenue growth was about 8%.

Q: How quickly did Netflix’s paid memberships grow?

Global streaming paid memberships increased by more than 10% in the latest quarter. The growth trend accelerated from 5% to 8% and then to more than 10%.

Q: Which regions showed strong Netflix subscriber growth?

The United States showed re-accelerating growth, particularly over the latest two quarters. Europe, the Middle East and Africa also re-accelerated, while Asia Pacific delivered strong, consistent growth and Latin America remained strong despite trailing the previous quarter.

Q: What did Netflix report about cash flow?

Netflix generated nearly $2 billion in operating cash flow during the latest three-month period. That was higher than the approximately $1.5 billion generated in the preceding quarter.

Q: How much Netflix stock was repurchased in Q3?

Netflix repurchased $2.5 billion of its shares during Q3. It also increased its share-repurchase authorization by more than $10 billion and had repurchased about $3.5 billion over the latest nine months.

Q: What did Netflix’s balance sheet look like after Q3?

Netflix held more than $7.4 billion in cash equivalents and about $5 billion in short-term investments. It also reported roughly $32 billion in content assets and about $4 billion in long- and short-term debt.

Q: What did the technical chart indicate after Netflix’s earnings?

Netflix shares rose more than 12% in after-hours trading, although that move could fluctuate. The stock had already broken below an uptrend that had developed over about a year, creating the possibility of a backtest followed by consolidation or lower prices.

Summary & Key Takeaways

• Netflix reported over $8.5 billion in revenue for Q3, with 8% growth excluding currency fluctuations.

• The company experienced a significant increase in global streaming paid memberships, with a re-acceleration of growth in the United States, Europe Middle East and Africa, and Asia Pacific regions.

• Netflix also raised its full-year 2023 free cash flow guidance to $65 billion and repurchased $2.5 billion in shares in Q3.