Netflix (NFLX) reported third-quarter results that beat analysts' estimates for both revenue and profit. Diluted earnings per share came in at $5.40, compared with expectations of $5.12, while revenue came in at $9.83 billion, just ahead of Wall Street's $9.78 billion US dollar, according to Bloomberg consensus estimates. The streaming giant added 5.07 million paid subscribers during the quarter, above the expected 4.52. The company released its fourth-quarter outlook with diluted earnings per share of $4.23, compared to analyst estimates of $3.90, and revenue of $10.13 billion, above expected March 10 .01 billion US dollars.

Bloomberg Intelligence senior media analyst Geetha Ranganathan joins Market Domination Overtime hosts Julie Hyman and Josh Lipton to discuss Netflix's results and what's next for the streaming company.

“It’s a pretty high quality beat,” Ranganathan tells Yahoo Finance. “If you looked for the subscriber numbers, they were definitely there. If you look for the revenue growth numbers, they've obviously exceeded them. But I think what really stood out to me was their margin guidance.” She explains that the company appears to be giving a conservative margin outlook, as its revenue guidance implies some increase in operating margin. “It's probably a bit of a conservative approach, but That's exactly how Netflix wants to express its new narrative. Remember, they won't be disclosing subscriber metrics in a few months. They really want to position themselves as a revenue growth story and definitely a profit growth story.

According to Ranganathan, the next step investors expect from Netflix is ​​a price increase. “A price increase is long overdue, and I think that's exactly what investors are looking for,” she says, adding: “If you look at the valuation of this stock, I mean it's a premium valuation, that's what it is no doubt. Sales growth.” is actually what underpins this high valuation. And of course, to achieve consistent sales growth, you need these price increases.

The analyst says Netflix has the pricing power and commitment to justify price increases, but “they're just waiting to see how they can execute on that price increase. You have to do this very carefully because remember, you're trying to balance subscriber growth with revenue growth. At the same time, they also need to increase their advertising tier, and how much they increase their advertising tier depends on how they price the ad-free tier, because if they really increase the advertising tier, if they increase the price significantly, they could end up getting a lot more subscribers on that At the advertising-based level and increasing their advertising revenue… that's going to be a really careful balancing act.”

The story continues

To see more expert insights and analysis on the latest market activity, check out more Market Domination Overtime here.

This post was written by Naomi Buchanan.