### Netflix Set for Strong Q3 2024 Results Amid Speculation of Price Increases

Netflix is anticipated to post solid results for the third quarter of 2024. However, some analysts believe the streaming giant may soon announce price hikes as benefits from its password-sharing crackdown begin to taper off. Netflix will release its Q3 earnings report on Thursday, Oct. 17, following the close of the market at 4 p.m. ET.

The company previously projected that its global average revenue per member (known as ARM) for the third quarter would be "roughly flat year over year" due to foreign exchange challenges and variations in plan and country mix. This has led to speculation that Netflix will need to raise prices to maintain its revenue growth. Analyst Dan Salmon from New Street Research mentioned the potential for a significant price increase in the U.S. in an Oct. 15 note, highlighting that previous hikes were limited to the Premium and Basic tiers.

The ad-free versions of Disney's Hulu and Warner Bros. Discovery's Max are currently more expensive than Netflix's Standard plan. Analysts Tim Nollen and Ross Compton from Macquarie Equity Research believe that Netflix has strong pricing power, considering it has not raised prices on its Standard tier since January 2022. Morgan Stanley's Benjamin Swinburne also expects Netflix to continue with incremental price hikes on its premium, ad-free plans to boost ARM, projecting a 4% growth in 2025 for this metric.

Netflix’s approach to price increases has been thoughtfully outlined by co-CEO Greg Peters, emphasizing their strategy to enhance value for subscribers through more exclusive content and live events. Indicators like acquisition, engagement, retention, and churn rates inform Netflix on the right timing for these price hikes.

For Q3, analysts predict that Netflix will add around 4.76 million net new paid subscribers, a notable decrease from the 8.76 million added in the same quarter last year. This previous gain largely resulted from the initial effects of their password-sharing enforcement. Nevertheless, some experts, like Alicia Reese from Wedbush Securities, see continued benefits from these measures, expecting the ad-supported tier to curb subscriber churn and drive growth.

Financial analysts forecast Q3 revenue to hit approximately $9.77 billion, a 14% increase year-over-year, with earnings per share at $5.11. This aligns closely with Netflix's own guidance. The company also expects an operating margin of 28.1%, up from 22.4% in the same period last year. Wedbush’s Reese anticipates Netflix will meet these expectations and provide a robust outlook for the end of 2024. The firm has accordingly raised its price target for Netflix shares from $725 to $775 each.

Starting in 2025, Netflix plans to discontinue reporting subscriber counts, shifting focus to metrics such as engagement and profitability. This change prompts questions about the long-term effects of the password-sharing crackdown and the ad-supported tier on subscriber growth. Despite this shift, analysts like John Blackledge from TD Cowen remain optimistic about Netflix's strong membership trends and growing margins, citing its broad content catalog as a competitive advantage.

Netflix continues to hold the top spot among U.S. viewers, with 23% favoring the platform for living-room entertainment, followed by YouTube and basic cable. This enduring popularity underscores Netflix's advantageous position in the streaming market, even as it navigates evolving business strategies and potential pricing changes.