Streaming giant $Netflix (NFLX.US)$ The financial data for the third quarter of 2024 has been released. As of the time of publication, Netflix's stock rose more than 8% at the opening bell.

Overall, Netflix's revenue and profits for the third quarter both saw double-digit growth, exceeding Wall Street expectations; subscriber numbers increased by 5.07 million, surpassing Wall Street's expectations of slowing user growth; Netflix's revenue guidance for the fourth quarter was stronger than expected, and the full-year performance guidance was also raised for the year.

Here are the key points of Netflix's third-quarter financial report:

Third-quarter performance:

Revenue of $9.825 billion, a 15% year-on-year increase;

Diluted EPS was $5.40, a 44.8% year-on-year increase.

Operating profit was $2.909 billion, a year-on-year increase of 51.8%;

Net income was $2.364 billion, a year-on-year increase of 41%;

Subscribers: As of the end of the third quarter, the total number of global streaming paid users was 0.2827 billion, a net increase of 5.07 million quarter-on-quarter, a year-on-year decrease of 42%, but better than the analyst's expected increase of 4.52 million.

Subscribers in the third quarter slightly decreased. Netflix stated during the earnings conference call that this was mainly due to price adjustments in some large markets in Latin America, which usually suppress user growth in the short term. However, early data for the fourth quarter shows a significant rebound in the number of users, especially in the growth performance of users in Latin America.

Furthermore, Netflix's third-quarter growth in paid users in the largest markets of the USA and Canada fell short of expectations. However, the slower growth in the USA and Canada was offset by the better-than-expected growth of users in the Asia-Pacific region. This is mainly due to Netflix improving its products and market fit in the Asia-Pacific region, and launching strong local content in Japan, South Korea, Thailand, and India in the third quarter. Therefore, the revenue growth rate in the Asia-Pacific region (19% year-on-year growth) leads all regions.

Netflix's third-quarter revenue, profit, and user growth exceeded expectations, and the fourth-quarter and full-year performance guidance also exceeded expectations.

Specifically, the fourth-quarter performance guidance includes operating revenue of $10.128 billion, a year-on-year increase of 14.7%; analysts expected $10.05 billion. Expected diluted EPS is $4.23, while analysts expected $3.9. Operating profit is expected to be $2.19 billion, with an operating margin of 21.6%, above the analyst's expected 21.2%; net income is expected to be $1.847 billion.

Netflix stated in its shareholder letter that looking ahead to the fourth quarter, anticipated big hits will cover content from countries such as the USA, Brazil, South Korea, the United Kingdom, and Germany. The company also plans to launch some very exciting live events, such as the second season of "Squid Game", the Tyson-Paul match, and two NFL games on Christmas Day.

Therefore, Netflix expects to have higher net additions in paid subscriptions in the fourth quarter than in the third quarter of 2024, with an operating profit margin of 22% expected in the fourth quarter, a five percentage point increase from the same period last year.

How do major banks evaluate Netflix's performance?

Goldman Sachs maintains a neutral rating and a target price of $705 for Netflix, also pointing out that the market may respond from mildly to positively to its third-quarter earnings. Analysts stated in a research report that the main achievements this quarter include slightly higher overall revenue than market expectations, easily outperforming the large cap in operating profit margin, and net growth below Goldman Sachs' forecast.

The bank further added that regarding the guidance for 2025, Netflix outlined several key points in its shareholder letter, including anticipating robust growth in revenue and profit by improving its core series/film products, as well as investing in advertising and gaming.

JPMorgan raised Netflix's target price from $750 to $850 and maintained a shareholding rating on the stock after the release of the third-quarter report. The analyst stated in a research report that Netflix continues to deliver strong financial performance, with the increase in revenue and operating income in the third quarter helping to improve the prospects for revenue growth, operating margin, and free cash flow in 2024.

Pivotal Research raised Netflix's target price from $900 to $925 and maintained a buy rating on the stock. The analyst mentioned in a research report that Netflix reported another strong quarterly performance, with user growth slightly exceeding market expectations in the third quarter and revenue growth surpassing expectations.

The company stated that Netflix has raised its revenue, operating margin, and free cash flow guidance for 2024, and has released strong revenue and operating income growth forecasts for 2025.

1. Regarding adjustments to subscription prices

In the past year, streaming media giants have all increased their subscription prices, such as Disney+ and Peacock raising their respective subscription prices this year.

During the phone earnings call, Netflix mentioned that it has raised subscription prices in countries or regions such as Europe, Scandinavia, Japan, and plans to also increase prices in Spain and Italy if the adjustment effect meets expectations.

However, Netflix currently does not intend to raise its subscription prices in the United States. The company stated that it will continue to monitor engagement, acquisition rates, retention rates, and other indicators to assess the optimal price point for consumers.

But Netflix currently does not intend to raise its subscription prices in the United States. The company stated that it will continue to monitor engagement, acquisition rates, retention rates, and other indicators to assess the optimal price point for consumers.

"We try to consider our pricing not in relation to competitors, but in the value we provide to users," said Netflix Co-CEO Greg Peters on the company's third-quarter earnings call on Thursday. "We hope to have a range of prices that are considered reasonable."

2. Impact of the Hollywood strike

Netflix stated at the earnings call that the strike has had a significant impact on program scheduling, with the content rhythm in the first half of this year not as smooth as expected, especially in the USA and Canada, as well as affecting global production. The program output rhythm is gradually returning to normal, although the production progress of TV and movies has not fully recovered, the situation is gradually improving.

3. New user growth points - live streaming, gaming

Netflix stated that live streaming is difficult to surpass on-demand content in terms of duration, but these activities will still contribute significantly to growth potential. In the live streaming field, plans include launching the Tyson-Paul boxing match, NFL games, and the WWE weekly 52 games starting in January 2025.

In addition, the company will develop games based on Netflix intellectual property, such as "Squid Game" and "The Ultimatum", as well as new installments of classic game series like "Monument Valley 3". These initiatives will help the company further increase user engagement and provide more choices for users.

These measures will help the company further increase user engagement and provide more choices for users.

4. Competition with YouTube in the television consumer sector

Netflix states that there is competition with YouTube in some aspects, but they also complement each other. For example, Netflix focuses on investing in ambitious high-quality content, covering users not reached by YouTube or other platforms. Netflix releases trailers on YouTube for content promotion.

Investors bet on Netflix falling before the earnings report.

The day before the financial report, Netflix options traded 0.2775 million contracts, an increase of 0.2 million from the previous trading day, with an implied volatility level of 78.87%. On the options chain, the most traded option was a put contract expiring today with a strike price of $600, trading 8240 contracts; followed by a call contract expiring today with a strike price of $750, trading 6017 contracts.

Additionally, the majority of unclosed positions are put contracts. Among them, there are 4379 unclosed put contracts expiring on January 17, 2025, with a strike price of $300; next is 4123 unclosed put contracts expiring this Friday, October 18, with a strike price of $650.

Editor/Rocky