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Netflix (NFLX) is scheduled to report its third-quarter results and business outlook on Wednesday, October 18. A video interview with Netflix executives, including co-CEOs Ted Sarandos and Greg Peters, will follow at 6:00 pm ET. What to watch:

SUBSCRIBERS: Netflix's membership trends are a closely watched measure of the company's growth trajectory.

In the second quarter, the company reported global streaming paid net additions of 5.9M and said revenue growth was driven by a 6% increase in average paid membership.

Netflix also said in its quarterly letter to investors: "We expect that our revenue growth will accelerate more substantially in Q4'23 as we further monetize account sharing between households and steadily grow our advertising revenue.

On the day after the company's last earnings report, JPMorgan analyst Doug Anmuth raised the firm's price target on Netflix to $505 from $495 and kept an Overweight rating on the shares. Coming out of the Q2 earnings there was no change to the firm's positive thesis on Netflix and the firm said it would buy the pullback in shares. While Netflix is monetizing paid sharing a bit slower than expected with only slight revenue acceleration in Q3 to 7%, paid sharing will be highly accretive to revenue over time, the analyst told investors at that time.

More recently, on September 28, JPMorgan lowered the firm's price target on Netflix to $455 from $505 with an unchanged Overweight rating on the shares ahead of the Q3 report. The firm's overall view on Netflix shares remains positive, but it lowered estimates to reflect recent comments from management around margin expansion. Investor conversations suggest increased concerns that paid sharing is less impactful than expected and providing less lift in Q4, while 2024 margin expansion could be less robust than anticipated, the analyst told investors.

Consensus forecasts recently called for $8.54B in revenue and $3.49 in earnings per share for the September-end quarter, versus the company's forecast for Q3 revenue of $8.52B and EPS of $3.52.

RATING CUT, TARGETS SLIPPING: On October 13, Wolfe Research downgraded Netflix to Peer Perform from Outperform without a price target. The company's 2024 average revenue per user expectations look full while today's paid-sharing net additions will lead to tomorrow's gross adds shortfall, the analyst told investors. The firm says Netflix's valuation is "reasonable" but will not withstand falling growth.

Earlier this week, Truist lowered the firm's price target on Netflix to $430 from $485 and kept a Hold rating on the shares ahead of its results. The firm is positive on the company's password-sharing efforts and its competitive position with a strong balance sheet, no linear TV exposure, and option to pull other well-lit growth levers like selling content, monetizing the box office, and pursuing live sports/news. The firm added, however, that Netflix's end-market is hyper-competitive with potential risk to out-years' bullish consensus subscriber expectations.

Meanwhile, UBS analyst John Hodulik lowered the firm's price target on Netflix to $500 from $525 and keeps a Buy rating on the shares. UBS expects Q3 results to be largely in-line with expectations, including similar subscriber net adds and accelerating revenue and operating income growth, the analyst said. The firm also forecasts "solid" commentary for Q4, including seasonally stronger net adds.

PRICE HIKES: On October 3, The Wall Street Journal's Jessica Toonkel and Sarah Krouse reported that Netflix plans to raise the price of its ad-free service a few months after the continuing Hollywood actors strike ends, likely beginning with the U.S. and Canada. According to people familiar with the matter, Netflix is also discussing raising prices in several other markets globally. It is unclear how much Netflix will raise prices by or when exactly the new prices will take effect, the Journal said.

After that report, Benchmark kept a Sell rating on Netflix with a $325 price target. Such a move "provides a positive cross read" for competing services like Comcast's (CMCSA) Peacock and Warner Bros. Discovery's (WBD) Max, the analyst told investors. Benchmark continues to view Netflix as much more of a media than a tech name. Although the company is seemingly executing well on its password sharing and AVOD initiatives, continued U.S. dollar strength could challenge expectations for double-digit Q4 sales growth, says the firm.

Commenting on news report says that Netflix is planning to increase the price on its ad-free plan once the actor strike ends, Oppenheimer said that while a price increase sometime in 2024 was already expected, based off comments from Q2 earnings, a Q4 hike would be sooner than expected. Management previously indicated it was holding off from increasing prices to avoid subscriber confusion and higher churn while it rolls out Paid Sharing. This also follows Disney's (DIS) price increase in October to $13.99 from $10.99 for its Disney+ service, the firm noted. Regardless, the price increase should increase ARM, either driving more subs to higher ARM ad-tier relative to ad-free Standard plan, or by increasing ad-free ARM, the firm added. Either way, Netflix should be able to report higher revenue, after disappointing investors, said Oppenheimer, which has an Outperform rating on the shares.

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