Netflix Stock, Q3 2024 Earnings Report Review: Analysts React

Netflix’s third-quarter outcomes are in, and so are the primary Wall Road verdicts on what they imply for the streaming large and its inventory. Most specialists had headed into the earnings report with a bullish mindset regardless of some warnings that the corporate’s elevated market worth could require some endurance earlier than an extra inventory run-up.

Led by co-CEOs Ted Sarandos and Greg Peters and govt chairman Reed Hastings, Netflix ended September with 282.72 million world subscribers. As forecast, quarterly internet additions of 5.07 million got here in under the year-ago interval when it had added 8.76 million.

The unique content material launched on the streamer within the third quarter included Emily in Paris season 4, The Good Couple, Beverly Hills Cop: Axel F, A Good Woman’s Information to Homicide, and the fourth and remaining season of The Umbrella Academy.

And for the present fourth quarter, administration late Thursday touted: “We’re excited to complete the 12 months sturdy with an amazing fourth-quarter slate, together with Squid Sport season 2, the Jake Paul/Mike Tyson struggle and two NFL video games on Christmas Day.” That led Netflix to forecast paid internet additions to be increased within the fourth than within the third quarter.

All that led numerous analysts to stay to their rankings and several other to additional hike their inventory value targets on the streamer. Netflix shares popped in Friday pre-market buying and selling, leaping greater than 6 p.c to above $730. However once more, there have been additionally some warnings that the inventory could not have the ability to maintain flying excessive.

For instance, TD Cowen analyst John Blackledge reiterated his “purchase” ranking on Netflix shares. After not too long ago boosting his value goal by $45 to $820, he raised it additional after the earnings replace to $835. “We raised our sub forecast following the third-quarter beat, whereas tweaking income, working revenue and earnings per share estimates in ’24 and long term,” he defined.

Mark Mahaney, analyst at Evercore ISI, additionally reiterated his inventory ranking post-earnings, in his case at “outperform,” and pushed up his value goal, on this case by $25 to $775 “within the wake of beat and lift third-quarter earnings outcomes.”

He additionally identified “key bullish takes,” comparable to “a report excessive working margin (30 p.c) that seems moderately sustainable,” a fourth-quarter outlook that “implies sturdy upside to Road sub estimates – due to a brilliant sturdy content material slate,” and the disclosure of “a number of choose value will increase, with extra to return, we imagine.”

BMO Capital Markets‘ Brian Pitz is one other analyst who raised his Netflix inventory value goal on Friday, boosting it by $55 from $770 to $825. He additionally reiterated his “outperform” ranking in a report entitled “Successfully Executing as Advert Monetization Thesis Stays Intact.”

Pitz highlighted a number of positives, together with “better-than-expected 2025 income development steering of 11-13 p.c (versus BMO’s 11.9 p.c)” and his “better confidence in 10 p.c advert income combine in 2026,” together with what he referred to as “best-in-class co-CEOs.” The analyst additionally argued that Netflix’s estimated $18 billion content material spending in 2025 “ought to onboard incremental customers/restrict churn.” And Pitz concluded: “Netflix stays a main beneficiary of the $150 billion of linear advert {dollars} poised to shift on-line (we estimate $20 billion within the subsequent three years).”

Guggenheim analyst Michael Morris additionally stays upbeat after elevating his 12-month inventory value goal from $735 to $810 earlier than the most recent earnings replace. After the report, he maintained his “purchase” ranking on Friday, highlighting a key driver of his bullishness in his word’s headline: “Increasing content material slate to gasoline additional development.” 

William Blair analyst Ralph Schackart on Friday equally caught to his “outperform” ranking on Netflix and not using a value goal. “Higher-Than-Anticipated Profitability Pushes Up Full-12 months Margin Expectations,” he highlighted within the headline of his report. “Margin Enlargement Continues Into 2025.”

His big-picture conclusion: “We stay optimistic that each this newer [ad] tier and paid sharing will present tailwinds to [revenue] by the medium time period. General, Netflix continues to be properly positioned to stay a secular streaming winner.” He additionally argued that deliberate subscription value will increase “will finally move by the mannequin to fulfill buyers.”

Pivotal Analysis Group analyst Jeff Wlodarczak continues to be the most important Netflix bull on the Road, on Friday additional boosting his monetary estimates and his Road-high inventory value goal from $900 to $925 and reiterating his “purchase” ranking. “This Is What Profitable Appears Like,” the title of his report mentioned.

“Netflix reported yet one more sturdy quarterly end result with reasonably higher than consensus third-quarter subscriber development, higher-than-forecast third-quarter income development…, a lot better than anticipated third-quarter free money move and raised ’24 income, working margin and free money move steering,” the analyst highlighted. “As well as, administration launched sturdy ’25 income and working revenue development forecasts that was precisely in-line with our and consensus expectations, though we imagine the working revenue development forecast is more likely to show to be conservative.”

Wlodarczak concluded: “We proceed to count on Netflix to have the ability to generate stable subscriber development and ARPU development (value hikes and persevering with to ramp promoting offset partially by decrease ARPU in growing markets) which ought to drive stable income development with persevering with increasing margins, a strong combo.”

Laurent Yoon, analyst at Bernstein, stays extra cautious than others with a “market-perform” ranking however he pushed up his inventory value goal by $155 to $780. “Easy crusing from right here?” he requested within the title of his Friday report.

“There have been some considerations round third-quarter internet sub provides quantity towards a softer content material slate and lapping the paid-sharing efforts,” he famous. “The consumer development was certainly disappointing — principally as a result of Latin America – but the worst fears are actually behind and the forward-looking commentary was encouraging.”

Yoon concluded by summarizing his present tackle Netflix shares this fashion: “The commonest query we’ve obtained about Netflix has been whether or not its valuation is ‘costly.’ Given the up to date steering and confidence round ‘25 and implied ‘26 numbers, we see additional upside potential.” And he highlighted: “We will’t consider a practical bear case within the near-term, and our sentiment stays the identical. Glad streaming.”

In distinction, Benchmark analyst Matthew Harrigan stays a giant Netflix bear, sticking to his “promote” ranking, even whereas elevating his inventory value goal by $10 to $555. “Simple Streaming Excellence Overpriced in Momentum Market, Particularly as Paid Sharing Advantages Mature,” he summed up his thesis within the headline of his report.

“Intermediate-term, though doubtless not near-term, member development dangers vs. our forecast could gear to the draw back,” he warned. “Benchmark’s valuation and underlying forecast acknowledge important development whereas acknowledging rising competitors in video streaming and more and more important diversion of client exercise towards media (TikTok, AR, short-form YouTube movies, and so on.) apart from long-form video content material whilst Netflix itself additionally accommodates to this setting.”

MoffettNathanson analyst Robert Fishman squared up the opposing takes on the place Netflix and its inventory stand proper now. “It has been an indeniable blockbuster run for the corporate that famously despatched Blockbuster to its grave,” he wrote. “It has achieved so within the face of a strike-impact content material slate.” And it has achieved so whereas rising its revenue margins.

“But, with a lot of the subscriber development seemingly representing improved monetization of an present consumer base, we query whether or not the momentum can proceed into subsequent 12 months,” he cautioned.

Sure, there may be nonetheless the expansion lever of the corporate’s still-developing advert enterprise. “The opposite lever on the firm’s disposal is pricing, but, whereas it’s doubtless that the corporate nonetheless has room to develop right here, stalled complete time considered per subscriber could suggest stalled pricing energy development as properly,” Fishman famous. “The corporate has spoken to view time per ‘member amongst proprietor households’ (as in, excluding customers beforehand password-sharing) as being up year-over-year, however it’s laborious to say the extent to which engagement from these password-sharers factored into the paying subscriber’s worth equation.”

What does all that imply? “At a 4 p.c estimated 2026 money move yield, Netflix’s inventory is massively costly for an organization whose personal steering implies a income deceleration into 2025 (slowing to 11-13 p.c development from 15 p.c this 12 months),” Fishman highlighted. “The corporate trades at the next value/free cahs move a number of (27.9 occasions) than many different large tech names, together with some with sooner development.” One in every of his charts confirmed Meta at 24.9 occasions, Amazon at 20.5 occasions, and Snap at 19.9 occasions, for instance.

Netflix’s newest outcomes additionally as soon as once more drew curiosity past conventional Wall Road analysts. “We estimate that Netflix now accounts for near 10 p.c of complete spending on video companies in the USA,” wrote Madison and Wall principal Brian Wieser in a word. “This compares with round 8 p.c of complete time spent watching content material, indicating the comparatively increased worth customers place on Netflix versus alternate options.”

He additionally highlighted additional advert traits. “Throughout the previous quarter 50 p.c of sign-ups in advertisements markets selected the advertisements plan, representing an acceleration from probably the most not too long ago disclosed determine of 40 p.c in every of the primary quarter of 2024 and the fourth quarter of 2023,” the professional wrote. “For context round what number of households subscribe by ad-supported tier, our evaluation of knowledge from Antenna means that 12 p.c of U.S. subscribers – round 7 p.c US TV households – have this plan, roughly double final 12 months’s stage. To the extent it’s appropriate, development from ad-supported members accounts for nearly all the service’s development in the USA because the tier was launched almost two years in the past.”