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Netflix Stock Surges on Subscriber Beat

Netflix NFLX -3.23% posted better-than-expected subscriber growth in Q4, adding 7.66 million net new subscribers, well above the company’s forecast of 4.5 million .

The company also announced that founder and co-CEO Reed Hastings will transition to the role of executive chairman to “complete the company’s succession process.” Netflix said chief operating officer Greg Peters will join Ted Sarandos as co-CEO.

Earnings of $7.85 billion increased 1.8% year over year, broadly in line with the company’s guidance, but earnings of 12 cents per share fell short of expectations due to non-cash expenses.

The operating margin of 7% was down from 8.2% last year, but higher than the company’s forecast of 4.2%. Operating income for him was $550 million, well above the company’s guidance of $330 million for him.

Wall Street consensus forecasts were for fourth-quarter sales of $7.9 billion and earnings of 55 cents per share. Analysts had expected a net gain of 4.6 million.

“2022 has been a tough year with a rocky start but a better end,” Netflix said in a statement.
Continue to improve all aspects of Netflix, introduce paid sharing,
Structure of our advertising offer. ”

For the March quarter, Netflix forecasts revenue of $8.2 billion and earnings per share of $2.82. The company has discontinued its previous practice of providing specific guidance on subscriber growth, but given its “normal seasonality” and recent strong growth, it expects to see “moderate” growth in the first quarter. We expect positive net additions, which we expect to decline from the fourth quarter. ” may have encouraged some growth. ”

Current Wall Street estimates for the March quarter call for revenue of $8.1 billion, profits of $2.99 a share, and the addition of 2.6 million net new subscribers.

Netflix shares rose 6.8% in late trading after the report.

The company has also appointed global television head Vera Bajaria as chief content officer and Scott Starver as chairman of his Netflix films. In a blog post, Hastings said he would “spend more time on philanthropic work” while “much more focused on keeping Netflix’s stock doing well.”

Regarding the recent launch of its ad-supported subscription tier, the company said it was “satisfied with the progress so far.”

According to Netflix, switching from other subscription levels to ad-supported plans is rare. The company still expects advertising to generate additional revenue and profits, but added that the impact in 2023 “will be modest as it will slowly build up over time.”

Netflix said it expects a broader rollout of “paid sharing” later this quarter.

The company said it expects a higher growth rate in the second quarter than in the first quarter, with earnings following an unusual pattern of net growth. However, the company said overall earnings should improve as “borrowing households” activate their accounts.

Netflix remains committed to double-digit revenue growth, operating margin expansion and positive free cash flow over the long term, he added. Looking to 2023, we expect currency-neutral revenue growth to accelerate throughout the year. Netflix said it expects annual growth in both operating profit and operating margin. Netflix now expects an 18% to 20% operating margin in 2023. Q1 operating margin is expected to be 20% versus 25% due to “timing of spending on content.”

In 2023, Netflix projects free cash flow to be “at least $3 billion.” The company ended the quarter with his $14 billion total debt, which is within his $15 billion target range of $10 billion. The company has $6 billion in cash and short-term investments. Netflix expects to resume share buybacks in 2023 barring any major acquisitions.

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