Analyzing Netflix Q1 2022 Earnings for YOUR Business
I’m sure you’ve heard by now that Netflix’s share price (ticker: NFLX) dropped over $130 after the release of their Q1 2022 earnings. Investors panicked and sold, sold and sold some more!
I however did a quick analysis of Netflix’s Q1 2022 earnings and, in my opinion, just based on the numbers, they are still a strong company.
In Quarter 1 (Q1) 2022, Netflix grossed $7.87B with a net profit of $3.58B. Even though the revenues were a mere 2.06% higher than the previous quarter, the gross profit was 45.08% higher than the previous quarter (Yes!) and 39.3% higher than Q3 of 2020 when the pandemic was in full swing and people were at home watching Netflix and chilling.
The net income just reported for Q1 was $1.6B equivalent to 163% higher than the previous quarter and only outdone by Q1 2021 by$1.71B or 6.875%.
The Earnings per Share (EPS) for Q1 2022 was $3.6, the 2nd highest in the last 6 quarters!
EBITDA stands for earnings before interest, taxes, depreciation, and amortization, and its margins reflect a firm’s short-term operational efficiency. EBITDA is essentially net income (or earnings) with interest, taxes, depreciation, and amortization added back. EBITDA can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. (Source: Investopedia.com)
Netflix’s earnings before interest, taxes, depreciation, and amortization (EBITDA) amounts to $5.21B, the highest since quarter 3 of 2020!
The drop in Netflix’s stock price by over $130 or 38% on April 19 2022 was interesting to say the least because the figures don’t bear it out. The drop, I believe, is based on analysts’ forecasts.
As per Yahoo.com, “analysts are already penciling in a substantial slowdown in net subscribers added…. additionally, Netflix halted all operations in Russia, a country with over one million subscribers.”
Yes indeed, the loss in subscribers is real and the competition is fierce for Netflix. Many other streaming services have been accelerated to market because of the pandemic and are pulling their content off of Netflix to populate their own.
From my perspective though, Netflix is still a sustainable company. It has profitized its business well, as its model is subscription-based.
It, of course, needs to plug those leaking holes (the major one being: the sharing of passwords), increase its subscriber base and create new revenue streams, to increase its net profit margin.
Netflix checks most of the boxes although their net profit could be higher, and in the previous quarters, the trend has indeed been consistently up.
So, I hear you saying, what does Netflix have to do with me and my business?
Everything!
I know you may be making slightly less than Netflix (😉) but I did the analysis to show YOU that the numbers don’t lie. Looking at your numbers and analyzing on a monthly or quarterly basis is what is needed to tweak, pivot or ramp up what you are offering.
I can guarantee that many of you are stressed because you do not have any money to show for the millions that you have made. You do not have income-producing assets. You do not have enough ROI. You do not have a sustainable business model. Your P&L is a pain point!
But again, the numbers don’t lie.
if Netflix can grow consistently, have a sustainable business model, be the leader in the industry, albeit what the analysts say, you can do it as well!