19 July 2024
If you are covering Netflix’s latest financial results, please find below a comment from Ben Barringer, technology analyst at Quilter Cheviot:
“While it is early days yet, one can certainly argue that Netflix’s move into a cheaper, ad-supported model is paying dividend following a very good latest set of results. The streaming giant saw revenues grow 17%, which were even better at constant currency, and margins remain strong and growing. Subscription numbers are growing and crucially new users have optionality when it comes to choosing a plan that works for them.
“This new ad-supported model is also presenting new opportunities for the business as it looks to bring the advertising platform in house. Clearly this will be very good from a margin perspective, but it will also give Netflix more control over what adverts customers see and thus can be better targeted. Given Netflix does not need to convert the advertising service subscriptions into full fat paid ones, there is a clear runway for future growth at the company.
“Furthermore, the business continues to experiment and look for new ways to increase engagement. It has continued its expansion into gaming and sports and given its history of success so far, we so no reason why they cannot replicate that in those spaces too. The company is redesigning its homepage, which can present a risk to customer satisfaction, but Netflix is so thorough in its testing and feedback of these things, we don’t foresee many issues there. Simply put, Netflix remains an excellent business that is executing exactly how it needs to and will stay ahead of the pack for many more years to come.”
