From Morningstar:

Netflix is set to release its fourth-quarter earnings report on January 23, 2023, after the close of trading. Ad-supported subscriptions are of interest, and we’re eager to see if net subscriber additions are high, driven by the ad-free tier. We’re also looking for insight on revenue from advertisers, the password-sharing crackdown, and where new subscribers are coming from.

The current stock price for Netflix is $485, while Morningstar’s fair value estimate is $410. They rate Netflix 2 stars, with a narrow economic moat but high uncertainty. Revenue growth is forecasted to be high-single-digit annually with 1%-2% annual growth for the next five years. This makes room for margin expansion as international markets mature and benefit from greater scale.

Morningstar also assigns Netflix a narrow moat and high uncertainty rating based on the evolving streaming media landscape and the additional competition Netflix faces. They expect subscriber growth to come mainly from international markets and insight on how Netflix will retain customers as the streaming landscape evolves. We’re interested to see how the company will continue to invest in appealing content and the effect of rising competition.

With so much competition in the streaming industry, it’s vital to continually offer appealing content at a price consumers find reasonable. We believe that only a few streaming services will maintain large customer bases necessary to fund content investment. The firm should continue raising prices at least every two years, and we expect a bump in advertising revenue. However, we believe Netflix has not yet reached its potential, leaving room for upside.

Ultimately, having a successful streaming service is all about consistently offering a depth of appealing content at a price point that consumers deem reasonable. The industry is not necessarily a zero-sum game, as customers can always add incremental streaming subscriptions. But with budgets being finite, we expect only a handful of streaming services to consistently hold very large customer bases, which we think will be necessary to continue funding content investment.



Read more: Netflix Earnings: What to Expect