OWith the launch of the first earnings season of 2022 by banks last week, quarterly reporting will continue this week. Perhaps one of the most watched companies reporting earnings this week will be netflix (NASDAQ:NFLX). The streaming services specialist is due to release its fourth quarter results on Thursday.
There will be a handful of metrics for investors to check when Netflix releases its latest quarterly results. But one of the most important metrics to watch will be the company’s forecast for first-quarter subscriber growth. This move will be particularly telling given that the company announced price increases for its service on Friday. By the time the company releases its latest results, management may have an idea of whether or not higher prices are discouraging subscriber growth.
What you need to know about Netflix’s price hike
Netflix announced on Friday that it was raising prices for all of its subscription tiers in the United States. Its basic subscription increased by $1 to $9.99 per month; standard subscription increased from $13.99 to $15.49; and the premium subscription has gone from $17.99 to $19.99. The prices of two of its levels increase in Canada.
In a statement to media, Netflix noted that the pricing reflects the company’s efforts to continue the continued expansion of its content library so users have plenty of options.
While the price increases are effective immediately for anyone who signs up for Netflix today, they won’t be rolling out to existing customers until later this year. Specifically, the company said it will notify Netflix subscribers of price increases in the coming weeks; and subscribers will receive 30 days notice.
Investors hope for strong subscriber growth in 2022
In 2021, Netflix faced a lull in subscriber growth in the first and second quarters of the year due to an increase in demand in 2020, when more people took refuge at home to help curb the spread of COVID-19. The total number of subscriber additions in the first half was around 5.5 million. But subscriber growth accelerated in the third quarter, with about 4.4 million customer additions during the three-month period. And in the fourth quarter of 2021, Netflix expects 8.5 million new customers.
Investors are likely hoping management will provide strong guidance for first-quarter subscriber growth. After all, Netflix has rolled out a lot of new content as its production capacity increases. A solid list of new content should help attract new subscribers.
But with the company tossing a price rise curve, some investors may wonder if subscriber growth could be curbed.
Of course, a price hike will likely always be good for investors, even if subscriber growth is slowing some down. But in the best-case scenario, the company would have the power to set prices to both raise prices and continue to rapidly increase subscriber numbers.
To get an idea of the subscriber growth trend so far in 2022, investors should check out management’s forecast for net new subscriber additions in the first quarter of 2022.
Netflix reports fourth quarter results after market close on Thursday, January 20.
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