Netflix Analysts See More Upside After Record Sub Gain, Price Hikes as Stock Hits All-Time High

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As a gamer, I was thrilled when Netflix announced their fantastic quarterly results late on Tuesday, blowing away Wall Street analysts with a new subscriber record! They also shared their upcoming price hikes for most plans in the United States, Canada, Portugal, and Argentina, which I’m keeping an eye on.

The positive surprises in both users and finances for Netflix can be attributed to its ventures into live sports, such as NFL games and boxing matches, along with the success of original series like the second season of “Squid Game”.

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The good news regarding user growth and financial performance at Netflix comes from their efforts in live sports broadcasting (like NFL games and boxing) and hit shows such as the second season of “Squid Game”.

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The increase in users and revenue for Netflix can be linked to their focus on live sports events, including NFL matches and boxing, as well as popular original series like the second season of “Squid Game”.

Despite the ongoing success and projected growth of the streaming service by 2024, causing some to question if this trend would persist, numerous analysts increased their predicted stock prices. A common point of agreement among them was that there remains potential for further growth in Netflix’s future.

During early morning trades on Wednesday, Netflix’s share price soared to a record peak of $999. By 9:33 a.m. ET, the stocks were climbing by 12.2%, trading at $975.33.

Title used by Guggenheim analyst Michael Morris in his report is: “Records Are Meant to Be Exceeded; Netflix Still Has Room for Growth.” In his analysis, he increased his long-term financial projections and raised his stock price target from $950 to a new high of $1,100. Summarizing his key findings, he stated that “The fourth quarter results of Netflix surpassed expectations on every financial metric with an unprecedented 19 million new subscribers, which is almost double the consensus estimate.” He further added, “We believe this is impressive, but we don’t think it’s the best yet.

Morris highlighted his conviction, stressing that “firstly, the company identifies a potential market for subscribers reaching over 750 million broadband households globally, excluding China and Russia. This suggests an international presence of 35% compared to the U.S.’s 66%, which is still increasing.

Moreover, “the Guggenheim analyst emphasized that ‘engagement from viewers is growing stronger’, particularly in December with a domestic viewership increase of approximately 16% and a record-breaking U.S. TV share of 8.5%.

This year, Morris has raised his projected number of new subscribers from 21 million to 25 million. He expects that 47% of these new subscriptions will come from users in the advertising tier, which is similar to the proportion forecasted for 2024.

Morgan Stanley analyst Benjamin Swinburne kept his positive stance on Netflix shares, upgrading his price prediction to $1,150. In a report titled “Keep Going”, Swinburne increased his projections for the company as well, citing stronger than anticipated performance and forecasts from the latest results.

The analyst highlighted that having an unprecedented size allows us to reinvest in our company, and the blend of a creative environment and proven success in execution gives us confidence that these investments will boost long-term profitability even more. He also noted that reaching 300 million global members is a significant achievement but not the end goal for Netflix; he added that in its most developed market, the U.S./Canada, the projected 9.5 million new subscribers in ’24 represented a nearly 30% increase over its previous best.

Bank of America analyst Jessica Reif Ehrlich maintained a favorable “buy” recommendation and increased her projected price to $1,175, up from $1,000. In her report titled “Spiking Net Adds,” she emphasized the ongoing growth in subscribers and earnings, as well as potential advantages such as advancements in advertising and live events.

Analyst Michael Pachter from Wedbush continues to be optimistic about Netflix. His Wednesday report is titled “Leaving with a Boom in 2024, but More Exciting Times Await.

As a gamer, I’m excited about the future of Netflix! They’re planning to amp up their live events, enhance ad solutions, and diversify content strategy for the coming years. In 2024, we saw a huge subscriber surge, but in 2025, price hikes will fuel revenue growth. However, it’s the ad tier that’s expected to really boost income in 2026. As Netflix continues to expand, their profit margin could significantly surpass expectations, leading to substantial free cash flow.

Consequently, Pachter maintained his positive stance on the stock and raised his projected price from $950 to a new level of $1,150.

As a passionate Netflix enthusiast, I can’t help but echo the excitement of “Going Out With a Bang” as Macquarie analyst Tim Nollen reaffirmed his optimistic “outperform” stance on the streaming giant. He raised his stock price target from $965 to an impressive $1,150! This upward revision stems from his enhanced projections.

In his analysis, Tim highlighted that with all subscription reporting now complete, investor attention will now center around Netflix’s potential to monetize its vast member base. He suggested that advertising and price increases could be the keys to addressing this challenge effectively.

Analogies based on sports were frequently used among financial analysts. For instance, BMO Capital Markets analyst Brian Pitz titled his analysis as “In the Lead to Increase Emerging Ad Budgets.” He not only confirmed his positive recommendation but also boosted his stock price prediction from $1,000 to $1,175.

He pointed out that the flexibility in pricing options (AVOD) led to an all-time high increase of approximately 19 million subscribers. Ad revenue doubled in 2024 and is projected to double again in 2025, due to its vast user base (70 million monthly active users), with more potential for growth. He further mentioned that the monetization potential from AVOD remains a substantial opportunity.

Regarding subscription fees, addressing the announced price increases for subscribers, Pitz stated: “Price is merely one method Netflix can broaden its user options and enhance monetization.

As an enthusiastic follower, I’d like to share a fascinating take by Evercore ISI analyst Mark Mahaney, who titled his report, “What’s the Word for Touchdown in Korean?!” This intriguing title underscores his confidence in the stock. He maintained his “outperform” rating and increased his price target from $950 to an impressive $1,100!

In summary, the main optimistic points were:
1) A new record high of 19 million subscriber additions in a single quarter.
2) An upward adjustment in the projected revenue for the year 2025, despite facing $1 billion in additional foreign exchange challenges.
3) The announcement of price hikes.
He emphasized that Netflix is dominating the streaming market due to exceptional performance, a top-notch content library, and advantageous scale.

Research Group analyst Jeff Wlodarczak continues to be the most optimistic about Netflix among his peers on Wall Street. In a report titled “This is What Winning Looks Like,” he maintained his “buy” recommendation and increased his stock price prediction to $1,250. He believes that Netflix offers an outstanding value for entertainment, a value that keeps improving, backed by their ad-supported offering which should enable the company to sustain strong subscriber growth and average revenue per user growth. Wlodarczak refers to this as a potent combination.

In the meantime, Laurent Yoon, an analyst at Bernstein, admitted that he initially suspected Netflix’s results announcement was a mistake. “No jokes,” he explained, “we believed it was a typo.” However, he was proven wrong as Netflix managed to exceed expectations yet again, reporting net adds significantly more than the most unrealistic (or so we thought) subscriber target we had heard.

Yoon’s conclusion: “The company’s outlook and impressive progression towards 2025, despite foreign exchange challenges, appears optimistic, and we agree. Moreover, each region reported over 4 million net additions, showing that Netflix’s tailored strategy for market penetration is proving successful. Furthermore, NFL games had minimal impact beyond the U.S., indicating that Netflix is refining its product-market fit to stimulate growth in international markets.

The analyst from Bernstein is similarly optimistic about Netflix’s advertising segment. He suggests that Netflix is making significant strides in its advertisement business, transitioning from a crawling stage to a walking one. The essential elements necessary for growth are starting to materialize, he contends. As the ad-tier subscribers grow, Netflix will have more opportunities to boost its monetization and establish itself among the major players (although it’s not there yet, but it’s on its way).

The analyst decided to maintain his “market-perform” rating for Netflix while increasing his stock price target to $975. This adjustment is based on expectations of higher subscriber growth and faster margin expansion, leading to a larger market multiple. He also acknowledged the possibility of additional gains stemming from the recovery of the ad market and subsequent investor enthusiasm.

Analyst Robert Fishman from MoffettNathanson maintained a more moderate stance with a “neutral” rating, yet he raised his stock price target significantly to $850. His reasoning is that the company’s faster-than-expected growth in revenue and earnings margins for 2025 and beyond justifies substantial positive adjustments to our forecasts up until 2030, as outlined in his report.

Regarding Netflix’s impressive subscriber growth, he stated that “this is just one instance, alas there are several more, where Netflix defied our expectations.” He further explained: “We consistently attempted to apply standard corporate principles to a company that essentially deals with video entertainment. However, Netflix has shown remarkable resilience over the past year and repeatedly demonstrated its ability to defy any sense of limitations or restrictions in the industry.

The main query now is: “Will Netflix manage to repeat their previous success and gain more subscribers in 2025?”
Fishman’s viewpoint: “Since the company decided not to reveal subscriber figures anymore (except for significant milestones), our understanding might be a bit hazy. Nevertheless, we significantly boost our projected growth in 2025 subscribers by 7 million, making a total of 25 million new additions. If 2024 taught us anything, this could still turn out to be an underestimation.

Edward Jones analyst David Heger continues to recommend keeping a “hold” position on Netflix without setting a specific stock price. In his analysis, he notes that Netflix saw a boost from airing two NFL games on Christmas Day and the return of the hit series “Squid Games”. Additionally, their lineup of new shows has recovered after being affected by earlier writer and actor strikes. Heger anticipates that subscriber growth may decelerate slightly in 2025 due to Netflix implementing a fee for shared accounts, but he expects they can continue to generate revenue growth through planned price increases and more users adopting ad-supported services.

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2025-01-22 17:55