Netflix Stock Tumbles Friday—Why Analysts Say They’re Still Bullish on the Streaming Giant

Netflix (NFLX) shares tumbled more than 8% on Friday after the streaming giant reported first-quarter earnings beating analyst estimates, but gave weaker-than-expected revenue guidance and said it would no longer report subscriber numbers starting in 2025.

However, analysts remained bullish, citing Netflix’s dominance in the streaming space and strong fundamentals with some even raising their price target and saying they “welcome” the coming subscriber reporting changes.

Bank of America Raises Price Target, Citing Updated Full-Year Forecasts

Bank of America analysts raised their price target for the stock to $700 from $650 citing updated forecast figures and several growth drivers.

Netflix updated its revenue growth expectations for the full 2024 year, saying that the company “expect[s] healthy revenue growth of 13% to 15%.” In the final quarter of 2023, the company had simply said it expected “healthy double digit revenue growth.” The company also updated its operating margin projections for the full 2024 year to 25% from 24%.

Bank of America said its higher price objective “reflects 25x (unchanged) our updated CY25E EBITDA forecast,” which is supported by Netflix’s “world-class brand, leading global subscriber base, position as an innovator and increased visibility in growth drivers.”

Those drivers include ramping its advertising business, continued benefits from Netflix’s crackdown on password sharing, its strong content slate for 2024, subscriber runway in developing markets, and pricing.

Macquarie Welcomes Shift Away From Reporting Subscriber Growth

“Investors will complain about lack of metrics to use, but [Macquarie] welcome[s] the decision,” Macquarie analysts said, with analysts noting that Apple (AAPL) made a similar change in reporting metrics moving away from iPhone units to focus on fundamental metrics, adding that they “hope that Netflix will provide more meaningful engagement metrics and more ad tier-related info over time.

The firm maintained its “outperform” rating saying that the streaming company has “plenty of upside” as “it builds its ad business and can raise prices selectively.”

Subscriber Reporting Change Reflects Evolution to ‘Slow-Growth, High-Profit Business,’ Wedbush Says

Wedbush analysts wrote that they found Netflix’s decision to stop reporting subscriber metrics “consistent with our oft-repeated assertion that Netflix would inevitably pivot from a high-growth, low-profit business to a slow-growth, high-profit business.”

The firm maintained its “outperform” rating, saying that “Netflix has reached the right formula with global content creation, balancing costs, and increasing profitability.”

Before the earnings report, Wedbush had removed Netflix from its “Best Ideas List,” saying that the analysts anticipate “it will be much harder for Netflix to impress investors in 2024 vs. 2023.”

Netflix shares were down nearly 9% at $555.62 around 3:15 p.m. ET Friday. Despite Friday’s losses, the stock has gained nearly 15% since the start of 2024.