Does Netflix have no chill?
Today's Fun Fact
The inventor of television would not let his own children watch TV.
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What to expect in today's market 🕒
Nike Inc. Earnings (NKE)
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General Mills Inc. Earnings (GIS)
FedEx Corporation Earnings (FDX)
BlackBerry Limited Earnings (BB)
Vivos Therapeutics Inc. Earnings (VVOS)
Netflix: Dethroned!
The streaming giant Netflix's (NFLX) new advertising-funded service has had a rocky start and has resulted in shares dropping more than 8% last Wednesday, wiping $11.5 billion off its stock market worth.
What happened?
In comparison to Disney+, which temporarily surpassed Netflix earlier this year as the largest streaming platform in the globe, Netflix has been charging more for every user who views advertisements on its site.
Last month, Netflix unveiled its brand-new ad-supported service. The ad-supported service, which was launched in the US with a monthly subscription fee of $6.99, was promised by Netflix to include just four to five minutes of advertising every hour.
When the firm revealed in April that it had seen a decline in subscriber counts over the first three months of the year, Wall Street was taken aback. Other streaming services with ad-supported models, such as Disney, Hulu (which is owned by Disney and Comcast jointly), and HBO Max (which is owned by Warner Bros. Discovery), are anticipated to increase their prices.
Following the firing of Bob Chapek, Disney's former CEO, who was succeeded by his predecessor Bob Iger last month, Wall Street is now closely waiting to see if Disney+ changes the price of its services more generally. Netflix's ad-supported tier, according to several Wall Street analysts, is still in its infancy.
Merger?
Media executives have predicted a possible merger between Netflix and Paramount Global or Disney. A $165 billion market value is assigned to Disney. The market value of Netflix is over $130 billion. If this merger does take place, it will be one of the biggest business transactions in history, establish a streaming industry juggernaut, and very certainly set off all kinds of antitrust alarm bells. With less than $12 billion in market value, Paramount Global is substantially smaller. Netflix has considered acquiring Paramount Pictures in the past.
In 10 years, streaming giant Netflix lost subscribers for the first time. The company lost 200K subscribers in Q1 2022. As per one analyst, 70 to 80% of the total economics [in streaming] will end up in Disney (Hulu and ESPN), Amazon Prime (SVOD) and YouTube (TV's AVOD). These companies are also expected to take up Netflix's market share as it doesn't own anything else.
In fiscal 2023, the company's earnings are expected to increase by 3% to $10.67 per share after declining -8% in 2022. Estimates of earnings are somewhat higher for FY22 but have decreased for FY23. Netflix's top-line revenue is anticipated to increase by 6% this year and another 7% in FY23 to $33.92 billion. With sales of $20.15 billion in 2019, FY23 would represent a 68% increase from pre-pandemic levels.
Shares of Netflix, which had fallen by nearly 50% at the beginning of the year, have increased by around 65% over the previous six months as other industry observers anticipate that increased content would reduce churn by 2023. Will Netflix return with their 'Knives Out'?
Market Reaction
NFLX ended at $288.30, down 0.83%.
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