Netflix’s third-quarter results are in, and so are the first Wall Street verdicts on what they mean for the streaming giant and its stock. Most experts had headed into the earnings report with a bullish mindset despite some warnings that the company’s increased market value may require some patience before a further stock run-up.
Led by co-CEOs Ted Sarandos and Greg Peters and executive chairman Reed Hastings, Netflix ended September with 282.72 million global subscribers. As forecast, quarterly net additions of 5.07 million came in below the year-ago period when it had added 8.76 million.
The original content launched on the streamer in the third quarter included Emily in Paris season 4, The Perfect Couple, Beverly Hills Cop: Axel F, A Good Girl’s Guide to Murder, and the fourth and final season of The Umbrella Academy.
And for the current fourth quarter, management late Thursday touted: “We’re excited to finish the year strong with a great fourth-quarter slate, including Squid Game season 2, the Jake Paul/Mike Tyson fight and two NFL games on Christmas Day.” That led Netflix to forecast paid net additions to be higher in the fourth than in the third quarter.
All that led various analysts to stick to their ratings and several to further hike their stock price targets on the streamer. Netflix shares popped in Friday pre-market trading, jumping more than 6 percent to above $730. But again, there were also some warnings that the stock may not be able to keep flying high.
For example, TD Cowen analyst John Blackledge reiterated his “buy” rating on Netflix shares. After recently boosting his price target by $45 to $820, he raised it further after the earnings update to $835. “We raised our sub forecast following the third-quarter beat, while tweaking revenue, operating income and earnings per share estimates in ’24 and longer term,” he explained.
Mark Mahaney, analyst at Evercore ISI, also reiterated his stock rating post-earnings, in his case at “outperform,” and pushed up his price target, in this case by $25 to $775 “in the wake of beat and raise third-quarter earnings results.”
He also pointed out “key bullish takes,” such as “a record high operating margin (30 percent) that appears reasonably sustainable,” a fourth-quarter outlook that “implies robust upside to Street sub estimates – thanks to a super strong content slate,” and the disclosure of “several select price increases, with more to come, we believe.”
BMO Capital Markets‘ Brian Pitz is another analyst who raised his Netflix stock price target on Friday, boosting it by $55 from $770 to $825. He also reiterated his “outperform” rating in a report entitled “Effectively Executing as Ad Monetization Thesis Remains Intact.”
Pitz highlighted several positives, including “better-than-expected 2025 revenue growth guidance of 11-13 percent (versus BMO’s 11.9 percent)” and his “greater confidence in 10 percent ad revenue mix in 2026,” along with what he called “best-in-class co-CEOs.” The analyst also argued that Netflix’s estimated $18 billion content spending in 2025 “should onboard incremental users/limit churn.” And Pitz concluded: “Netflix remains a primary beneficiary of the $150 billion of linear ad dollars poised to shift online (we estimate $20 billion in the next three years).”
Guggenheim analyst Michael Morris also remains upbeat after raising his 12-month stock price target from $735 to $810 before the latest earnings update. After the report, he maintained his “buy” rating on Friday, highlighting a key driver of his bullishness in his note’s headline: “Expanding content slate to fuel further growth.”
William Blair analyst Ralph Schackart on Friday similarly stuck to his “outperform” rating on Netflix without a price target. “Better-Than-Expected Profitability Pushes Up Full-Year Margin Expectations,” he highlighted in the headline of his report. “Margin Expansion Continues Into 2025.”
His big-picture conclusion: “We remain optimistic that both this newer [ad] tier and paid sharing will provide tailwinds to [revenue] through the medium term. Overall, Netflix continues to be well positioned to remain a secular streaming winner.” He also argued that planned subscription price increases “will eventually flow through the model to satisfy investors.”
Pivotal Research Group analyst Jeff Wlodarczak continues to be the biggest Netflix bull on the Street, on Friday further boosting his financial estimates and his Street-high stock price target from $900 to $925 and reiterating his “buy” rating. “This Is What Winning Looks Like,” the title of his report said.
“Netflix reported yet another strong quarterly result with moderately better than consensus third-quarter subscriber growth, higher-than-forecast third-quarter revenue growth…, much better than expected third-quarter free cash flow and raised ’24 revenue, operating margin and free cash flow guidance,” the analyst highlighted. “In addition, management released strong ’25 revenue and operating income growth forecasts that was exactly in-line with our and consensus expectations, although we believe the operating income growth forecast is likely to prove to be conservative.”
Wlodarczak concluded: “We continue to expect Netflix to be able to generate solid subscriber growth and ARPU growth (price hikes and continuing to ramp advertising offset partially by lower ARPU in developing markets) which should drive solid revenue growth with continuing expanding margins, a powerful combo.”
Laurent Yoon, analyst at Bernstein, remains more cautious than others with a “market-perform” rating but he pushed up his stock price target by $155 to $780. “Smooth sailing from here?” he asked in the title of his Friday report.
“There were some concerns around third-quarter net sub adds number against a softer content slate and lapping the paid-sharing efforts,” he noted. “The user growth was indeed disappointing — mostly due to Latin America – yet the worst fears are now behind and the forward-looking commentary was encouraging.”
Yoon concluded by summarizing his current take on Netflix shares this way: “The most common question we’ve received about Netflix has been whether its valuation is ‘expensive.’ Given the updated guidance and confidence around ‘25 and implied ‘26 numbers, we see further upside potential.” And he highlighted: “We can’t think of a realistic bear case in the near-term, and our sentiment remains the same. Happy streaming.”
In contrast, Benchmark analyst Matthew Harrigan remains a big Netflix bear, sticking to his “sell” rating, even while raising his stock price target by $10 to $555. “Undeniable Streaming Excellence Overpriced in Momentum Market, Especially as Paid Sharing Benefits Mature,” he summed up his thesis in the headline of his report.
“Intermediate-term, although likely not near-term, member growth risks vs. our forecast may gear to the downside,” he warned. “Benchmark’s valuation and underlying forecast recognize significant growth while acknowledging increasing competition in video streaming and increasingly significant diversion of consumer activity toward media (TikTok, AR, short-form YouTube videos, etc.) other than long-form video content even as Netflix itself also accommodates to this environment.”
MoffettNathanson analyst Robert Fishman squared up the opposing takes on where Netflix and its stock stand right now. “It has been an indisputable blockbuster run for the company that famously sent Blockbuster to its grave,” he wrote. “It has done so in the face of a strike-impact content slate.” And it has done so while growing its profit margins.
“Yet, with much of the subscriber growth seemingly representing improved monetization of an existing user base, we question whether the momentum can continue into next year,” he cautioned.
Yes, there is still the growth lever of the company’s still-developing ad business. “The other lever at the company’s disposal is pricing, yet, while it is likely that the company still has room to grow here, stalled total time viewed per subscriber may imply stalled pricing power growth as well,” Fishman noted. “The company has spoken to view time per ‘member amongst owner households’ (as in, excluding users previously password-sharing) as being up year-over-year, but it is hard to say the extent to which engagement from those password-sharers factored into the paying subscriber’s value equation.”
What does all that mean? “At a 4 percent estimated 2026 cash flow yield, Netflix’s stock is massively expensive for a company whose own guidance implies a revenue deceleration into 2025 (slowing to 11-13 percent growth from 15 percent this year),” Fishman highlighted. “The company trades at a higher price/free cahs flow multiple (27.9 times) than many other big tech names, including some with faster growth.” One of his charts showed Meta at 24.9 times, Amazon at 20.5 times, and Snap at 19.9 times, for example.
Netflix’s latest results also once again drew interest beyond traditional Wall Street analysts. “We estimate that Netflix now accounts for close to 10 percent of total spending on video services in the United States,” wrote Madison and Wall principal Brian Wieser in a note. “This compares with around 8 percent of total time spent watching content, indicating the relatively higher value consumers place on Netflix versus alternatives.”
He also highlighted further ad trends. “During the past quarter 50 percent of sign-ups in ads markets chose the ads plan, representing an acceleration from the most recently disclosed figure of 40 percent in each of the first quarter of 2024 and the fourth quarter of 2023,” the expert wrote. “For context around how many households subscribe through ad-supported tier, our analysis of data from Antenna suggests that 12 percent of U.S. subscribers – around 7 percent US TV households – have this plan, approximately double last year’s level. To the extent it is correct, growth from ad-supported members accounts for almost all of the service’s growth in the United States since the tier was launched nearly two years ago.”
Source link
