Prepared to reveal its Q4 2024 and annual outcomes, Netflix – a leading global streaming service – will unveil results that may mark the conclusion of its quarterly user subscription reports, as the firm stated last year it would prioritize different key performance indicators.
Netflix, under the leadership of co-CEOs Ted Sarandos and Greg Peters, as well as executive chairman Reed Hastings, concluded September with a total of 282.72 million subscribers worldwide. Financial analysts predict that they surpassed 290 million by the end of the year thanks to season 2 of the popular Korean drama Squid Game, along with the Christmas NFL games.
Although Netflix’s shares experienced a decline recently, causing them to drop approximately 5 times their value so far this year (as of Thursday’s market close), following a significant increase in 2021, numerous experts still endorse the stock, with some even identifying it as a top choice for 2025. Furthermore, several analysts have increased their predicted prices ahead of the latest financial report.
Let’s take a peek at the predictions and key points that analysts on Wall Street have made in their earnings outlook reports.
As a dedicated Netflix gamer, I’m still bullish on this streaming giant! Michael Morris, the analyst from Guggenheim Securities, has kept his “buy” recommendation and bumped up his price target from $825 to a whopping $950. Why? Well, Netflix is undeniably the reigning king of streaming, and I believe this leadership role will keep delivering impressive returns for shareholders in the long haul.
Sure, the shares have dropped around 10% since their peak in early December, while the S&P 500 has only dipped by 4%. But
It’s anticipated that the streamer will conclude revealing its regular member count with a high level of success, given the significant engagement in key live and franchise content. Morris added, referencing Guggenheim colleague Seth Ostrie’s survey among investors, many anticipate over 11.1 million new users in the upcoming quarter, with some even predicting more than 13.1 million. Consequently, our estimate has been increased to 10.5 million from the previous 9.5 million and is higher than the sell-side consensus of 9.1 million.
Similar to other experts, he predicted that a powerful US dollar could negatively affect Netflix’s recent earnings and future performance. He based this prediction on potential adjustments to our 2025 forecast due to currency exchange rate fluctuations.
Nevertheless, “we anticipate our core revenue will increase by nearly 14%, driven by the expansion of our global membership base, the strength of our subscription pricing, growth in ad revenue, an increase in ad-supported content offered to premium subscribers, and our distinctive multi-market content strategy. This strategy acts as a beneficial factor, or a hedge, in a strong dollar economy,” Morris summarized.
Analyst Mark Mahaney from Evercore ISI maintains an optimistic stance towards Netflix, assigning it an ‘outperform’ rating and a projected price of $950. In a brief titled “Will Squid Game II and NFL Christmas Be Adequate?”, he also emphasizes the potential influence of a robust dollar.
The Wall Street estimates of roughly 9 million global subscriber additions were deemed “reasonable, even a bit cautious,” considering the robust fourth-quarter content lineup that includes the second season of Squid Game on December 26 and positive momentum from live events such as Paul vs. Tyson and NFL Christmas Day games.
The projected first-quarter revenue targets might need adjustment, considering the current robust U.S. dollar, according to Mahaney’s statement. For the entire year 2025, he suggested that Netflix might decrease its existing growth estimate of 11-13% with a 28% operating margin to something closer to 10-12% and 27%, primarily due to foreign exchange fluctuations. He also mentioned hedging strategies and potential price increases in markets with high inflation as possible measures Netflix could employ to mitigate the impact.
In the meantime, analyst Peter Supino from Wolfe Research discussed how the potential impact of a strengthening U.S. dollar could influence Netflix’s stock and investors’ perspectives. He pondered if the rising U.S. dollar could weaken Netflix’s short-term bullish case. Although investors anticipate near-record fourth-quarter subscriber additions and content growth into 2025, Supino emphasized that financial projections will become increasingly crucial as Netflix stops disclosing its subscriber data.
He further contended that a 8% increase in the U.S. dollar during the fourth quarter could result in a reduction of mid-single digits for Netflix’s operating income estimates in 2025. He also cautioned that despite the NFL games and Paul/Tyson fight advertising, average revenue per user (ARPU) might decrease sequentially, which, coupled with no disclosure on subscriber additions as paid sharing tailwinds wane, could create a risky short-term situation for investors.
Supino assigns a “peer comparable” rating to Netflix without providing a specific price target. In simpler terms, he suggests that Netflix must consistently demonstrate a positive loop of content production, user engagement, subscriber growth, and pricing with double-digit expansion for an extended period in a challenging industry landscape for its shares to surpass others.
Compared to other analysts, John Blackledge from TD Cowen is more optimistic. He predicts that Netflix will add 9.42 million paid subscribers in the fourth quarter, attributing this to seasonal trends and a robust lineup of fourth-quarter originals. He kept his recommendation for the stock at “buy”, but raised his price target from $835 to an impressive $1000. In his analysis, he points out that his recent annual ad buyer survey indicates a substantial advertising opportunity for Netflix and his consumer survey shows that Netflix remains the preferred choice for home viewing.
In addition, the company has control over its pricing through various means. It was announced that the fundamental plan was discontinued in Brazil during the final quarter, which followed similar decisions in the U.S., France, U.K., and Canada earlier. Morris stated that it is anticipated that this strategy will be implemented in other markets as well, a move viewed positively as a catalyst for growth in AVOD subscribers.
The streamer recently stated that they currently have approximately 70 million monthly active users on their ad tier. He predicts that by the end of 2025, there will be around 45 million paid global members using this tier, taking into account multiple users per account. By 2029, he expects this number to increase to about 76.2 million.
Tim Nollen, an analyst at Macquarie, posits that as subscriber disclosures come to an end, investors will scrutinize ad tier trends more closely. Nollen anticipates a robust fourth quarter for Netflix, marked by significant content events. His attention now lies in optimizing the ad tier, which may involve expanding live sports and increasing prices, thereby bolstering revenue and earnings.
Nollen reaffirmed his “outperform” rating and raised his stock price target from $795 to $965, based on enhanced financial forecasts. He projects an ad revenue contribution of approximately $2 billion in 2025, $3 billion in 2026, and $4.5 billion in 2027 when Netflix’s efforts with The Trade Desk and Magnite in ad technology reach their peak. Furthermore, Nollen expects a further boost from a potential 10-15% price increase to the U.S. standard plan, adding an estimated $600 million annually to the bottom line.
Although Netflix no longer shares user data, analysts anticipate that live events will play a significant role in attracting and retaining subscribers, with these events potentially increasing expenses. The analyst suggests that Netflix’s global reach could make it appealing to major sports leagues over time – the WWE contract has already started, they have the rights for the next two Women’s soccer World Cups, and they might secure MLB and NFL rights as early as 2029 and 2030. Nollen concludes by stating that Netflix may have made a profit from the NFL Christmas games and is optimistic that although content costs will rise, they will still achieve a 30% operating margin in 2027.
Michael Pachter, an analyst from Wedbush, continues to be optimistic about Netflix. He believes that Netflix will keep growing its profitability and producing more free cash flow, which reinforces his viewpoint that the company is a good investment (or ‘outperform’ rating). His projected stock price target for Netflix stands at $950.
As a dedicated fan, I firmly believe that Netflix has solidified an almost unbeatable advantage in the streaming industry. This lead, I argue, is a ‘moat’ that competitors are struggling to replicate. Despite Netflix’s recent crackdown on password sharing, its new advertising tier has shown promising signs of revenue growth, a trend we anticipate will continue for several years. In fact, within the past six months, at least 30 million accounts have transitioned to the ad tier. This move not only reduces subscriber churn but also alleviates the pressure to constantly add new subscribers. Looking ahead, I envision Netflix amplifying its ad tier revenue by hosting more live events, refining its advertising solutions, and leveraging new partnerships.
Additionally, Pachter revealed his projected number of new subscribers for the last three months of 2024, estimating a total of approximately 10 million worldwide. This figure, he noted, is higher than the average prediction by analysts on Wall Street, which stands at 9.2 million.
Brian Pitz, an analyst at BMO Equity Research, expressed a strong optimism in his report titled “Localization and ‘Shoulder Content’ to Boost Engagement/Unlock Ad-Supported Video on Demand (AVOD) Monetization”. This report led him to increase his prediction for Netflix’s stock price from $825 to $1,000, while maintaining his “outperform” rating.
In the report, he stated that there is growing interest among advertisers in AVOD monetization. He raised his forecast for the number of end-2025 AVOD users from 60 million to 90 million, attributing this increase to successful live events during the fourth quarter and the beginning of WWE in the first quarter. He also indicated that there could be further growth due to upcoming events like the Women’s World Cup soccer in 2027, as well as unannounced content.
Additionally, he believes there will be sustained growth in both audience and interaction, contending that the success of Netflix’s content strategies is driving significant viewership. He specifically mentioned “Squid Game” Season 2 and WWE broadcasting as instances supporting his point.
Lastly, I’m excited to share that the cost structure remains flexible for both standard and premium packages, as Pitz pointed out. For approximately a decade now, the prices for Netflix Standard and YouTube Premium have been remarkably similar. Meanwhile, YouTube TV and Netflix Premium are significantly more affordable compared to cable TV pricing, with the latter being just two to seven times less expensive.
2024 has wrapped up, and as I sit down to game and reflect on the market predictions for 2025, I can’t help but feel bullish about Netflix. Jessica Reif Ehrlich, an analyst at Bank of America, shares my sentiment. In her end-of-year preview, she emphasized her optimism towards Netflix, giving it a “buy” rating with a price target set at $1,000.
Her reasoning is compelling: the strength of Netflix’s globally recognized brand, its extensive subscriber base, and its reputation as an innovative trailblazer in the streaming industry all point to continued success for the platform. In fact, she went so far as to call it one of her top picks for the upcoming year!
So, as I dive back into my gaming world, I can’t help but feel excited about what the future holds for Netflix. It seems that 2025 is shaping up to be an amazing year for this streaming giant.
She emphasized several key factors, including:
1. The ongoing expansion of subscriber numbers.
2. A rapidly increasing advertising business, projected to double in 2025 (even starting from a small foundation), and serve as a long-term growth catalyst from 2026 onwards.
3. Growth in live programming, which not only enhances subscriber acquisition but also increases the advertising business by offering premium inventory. For instance, the Tyson/Paul fight resulted in 1.43 million new subscribers in the U.S., according to Antenna.
4. The potential for growth in gaming as well.
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2025-01-20 17:25