Traders wait to see if Netflix can keep its streak of subscriber surprises going

Published Tue, Apr 18 202311:22 AM EDTUpdated Tue, Apr 18 202311:27 AM EDT

Netflix reports earnings after the bell Tuesday and traders know that pretty much all that matters to the stock is how many subscribers did the streamer add for the prior period. The stock has been on a roll the last three quarters as Netflix posted an increase in net global subscriptions that, each time, significantly beat Wall Street's expectations. Netflix's recent streak of subscriber surprises come after the streaming giant struggled to add subscribers in the fourth quarter of 2021 and glaringly missed consensus expectations in the following quarterly period. Those uncharacteristic misses dramatically cut the value of the stock. But Netflix has doubled off its 52-week low as it got its subscriber mojo back. Here's a look at recent quarters' subscriber additions vs. Wall Street estimates and the subsequent stock reaction, according to Goldman Sachs data. The question for investors now is: Will Netflix be able to keep this momentum? Although the stock is seeing better days, Goldman isn't too sure. Analysts at the firm expect Netflix to report in-line to a possible slight upside in subscriber performance for the first quarter, saying they had expected the company to implement a more accelerated global crackdown on widespread password-sharing . The company's crackdown extended to just four additional markets during this period, Goldman noted. "We believe NFLX mgmt will frame the password sharing crackdown as a longer duration initiative in 2023 that it is likely to be better aligned in specific geographies with a more robust content slate than the one seen in March 2023," Goldman analyst Eric Sheridan wrote in the research note that contained data on the company's subscription performance. Analysts surveyed by FactSet expect the streaming giant to announce 1.38 million new memberships for the first quarter of 2023, and to post earnings per share of $2.86 on revenue of $8.18 billion. The company previously predicted that revenue growth in the first quarter of this year would rise 4%, driven by additional paid memberships and more money per paid membership. So far, the recent surge in subscriptions have proven the success of Netflix's less-expensive ad-supported plan launched in November. Although ad-supported subscribers represent 1% of Netflix's U.S. subscriber base, Goldman analysts expect this plan to attract additional members. The first quarter also marks Netflix's rollout of its paid sharing program launched in February, which allows users to pay extra to share their account with people outside of their homes. Netflix previously said it would no longer give subscriber guidance after its earnings report for the third quarter of 2022, although it will still report the numbers in future earnings reports. The company said it is prioritizing revenue as its primary top line metric rather than paid membership growth.