2024-10-25 09:34:00
More than two years ago, in mid-June 2022, Netflix‘s stock price collapsed to just over $160. Just a few months earlier, in the wake of the Covid-19 euphoria surrounding “home profiteers,” the price list showed prices around $690. However, the normalization of demand after the coronavirus pandemic and increasing competition in the streaming sector then put Netflix to the test.
Today, in the fall of 2024, this provisional minimum has long been forgotten. Netflix has won the so-called “streaming wars” and opened up further growth opportunities in areas such as paid sharing or new, cheaper, ad-funded offerings. Added to this is the fact that there is a greater focus on margins. Netflix recently managed to rise to a price level of around $770. In just over two years the value has almost quintupled.
Netflix exceeds high expectations
Since the beginning of the year alone, the streaming champion’s shares have increased in value by almost 60%. Due to the strong increase in share prices, market experts’ expectations about the group’s results have also skyrocketed. However, when it comes to the third quarter results, they managed to exceed even high expectations and provide a convincing outlook for the last quarter of this year and for 2025.
While Netflix welcomed 5.07 million new paying customers between July and September, group-wide sales increased 15% to $9.83 billion from a year earlier. Adjusted for one-time items, earnings per share were $5.40. Analysts previously expected Netflix to generate revenue of $9.77 billion with adjusted earnings per share of $5.12. They were particularly pleased that revenue from ad-financed offerings increased above average, up 35%.
For the current final quarter of 2024, management expects sales to increase 14.7% to $10.13 billion. In financial year 2025, revenues are expected to increase another 11-13% to around 43-44%. Many analyst comments were equally positive.
Brian Pitz, analyst at BMO Capital, believes the latest quarterly results showed the streaming provider “operating effectively” while the ad monetization thesis remains intact. Additionally, the sales growth forecast for 2025 was better than expected. For Netflix shares, the price target was therefore raised from 770.00 to 825.00 dollars, while the “outperform” rating was confirmed. For his part, Jefferies analyst James Heaney expects continued “robust” growth in user numbers. This should be guaranteed by new content such as live NFL games or the second season of the Squid Game series.
Netflix is expanding its lead
It is also thanks to Netflix’s leadership in content that the company is expanding its lead. In times of crisis, this advantage has even increased. Richard Broughton, executive director of Ampere Analysis, told CNBC that Netflix has benefited from continued investment in content, despite a bleak environment for the broader media landscape. “The last 24 months have seen content spending cuts, hiring freezes and layoffs at some of the major movie studios and streaming providers.
Yet Netflix has tried to continue investing in content. The company is therefore very well positioned for the coming years. If we think about reality, drama, romance and science fiction, Netflix will be responsible for no more than 1 in 10 global series next year. “Netflix is in a very different position than some of its competitors simply because of size,” Broughton said.
Anyone who is a Netflix customer knows the diversity of the offer and will probably get their own personal return on investment with a Netflix investment. Anyone who bought 10,000 euros worth of Netflix shares ten years ago now owns almost 140,000 euros, i.e. a price increase of around 25% per year on average.
#Netflix #big #beneficiary #streaming