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Netflix's (NFLX) Expanding Games Portfolio Aids Prospects

Netflix’s NFLX focus on expanding its mobile games portfolio is deepening with 40 new games slated to be released this year and 70 in the development pipeline. The streaming giant is also developing 16 games in its in-house game studios.

The company also announced the availability of Highwater and the upcoming release of Terra Nil (Mar 28). Other notable upcoming games include Too Hot to Handle (later this year), Mighty Quest: Rogue Palace (as a part of the Ubisoft partnership), Monument Valley 1 and Monument Valley 2 (next year).

The streaming giant is pushing hard to keep subscribers glued to the platform amid tough competition from the likes of Disney DIS, Comcast CMCSA and Apple AAPL. Despite a strong and diverse content portfolio, Netflix has been suffering from stiff competition. Its initiative to stop password sharing is also expected to boost subscriber growth.

Netflix has also been taking the route of acquisitions to expand its footprint in the gaming industry. Since launching the game initiative in November 2021, the company has acquired several studios including Finland’s Next Games, Texas-based developer Boss Fight Entertainment, and Night School Studio, the developer best known for its supernatural mystery adventure, Oxenfree.

Netflix Suffering From Stiff Competition

Netflix gained 7.66 million paid subscribers globally, higher than its estimate of 4.5 million users in the fourth quarter of 2022. It added 8.28 million paid subscribers in the year-ago quarter.

Netflix, Inc. Price and Consensus

Netflix, Inc. Price and Consensus
Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

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At the end of the fourth quarter, the company had 230.75 million paid subscribers globally, up 4% year over year.

Netflix shares have declined 18.6% in the past year compared with the Zacks Consumer Discretionary sector’s fall of 22.1%. NFLX shares have also underperformed Apple but were better than Comcast and Disney. Shares of Apple, Comcast, and Disney shares have declined 4.8%, 22% and 32%, respectively.

Netflix is suffering from stiff competition and its ad-supported plans have failed to ignite user interest. The company launched its ad-supported service on Nov 3, with the basic plan costing $6.99 a month in the United States.

Disney followed in the footsteps of Netflix to offer its ad-supported tier starting Dec 8, 2022. The company’s streaming service Disney+, as of Dec 31, 2022, had 161.8 million paid subscribers compared with 164.2 million as of Oct 1, 2022.

Apple’s streaming service, Apple TV+, continues to gain recognition with its critically acclaimed and popular shows like Ted Lasso. Apple’s The Boy, the Mole, the Fox and the Horse won an Oscar for Best Animated Short Film this year. Last year, Apple won three Academy Awards for CODA.

Comcast’s Peacock also offers a free-to-watch tier with ad support that has about 40,000 hours of content. Peacock is well poised to grow, owing to its vast library of IPs and new productions.

Nevertheless, Netflix’s strong content portfolio and an expanding game portfolio is expected to help it win new subscribers. This Zacks Rank #3 (Hold) company currently expects first-quarter 2023 earnings of $2.82 per share. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $2.81 per share, unchanged in the past 30 days.

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