Netflix (NASDAQ:NFLX) investors have had an excellent 12 months, with the stock’s 77% returns handily beating the NASDAQ’s 28% gain.
Invest with Confidence:
- Follow TipRanks' Top Wall Street Analysts to uncover their success rate and average return.
- Join thousands of data-driven investors – Build your Smart Portfolio for personalized insights.
With the streaming giant set to report 4Q24 earnings today after the close, investors will be hoping momentum will continue into 2025.
Looking at the big picture, Wedbush analyst Alicia Reese thinks rivals will keep finding it difficult to knock the segment leader off its perch.
“Netflix has established a virtually insurmountable lead in the streaming wars,” Reese said ahead of the print. “Netflix can retain its moat while competitors try to replicate its business model. Even as Netflix has lapped the password-sharing crackdown, we expect its advertising tier to drive revenue growth for several years.”
The ad-supported tier is key here, as its introduction has successfully reduced churn, easing the need to attract new subscribers, with over 30 million accounts switching to the ad tier within the past six months.
As Netflix adds more live events, improves its advertising solutions and targeting, and leverages new partnerships, over the next several years, Reese thinks the company is “positioned to accelerate ad tier revenue contribution.” In fact, by 2026, Reese expects the ad tier will become the “primary revenue growth driver.”
As for what to expect in the readout, key findings from a recent Wedbush survey focused on the U.S. market show that ad tier membership continues to grow, although overall subscriber growth slowed in Q4. Premium tier churn is expected to rise in Q1 due to typical seasonal patterns, however, the shift from the ad tier to premium and the return of lapsed subscribers should help counter this trend. Additionally, while lapsed subscribers planning to return will probably choose the ad tier, the balance is gradually shifting back toward premium subscriptions.
Numbers-wise, Reese is calling for Q4 revenue of $10.154 billion compared to her previous expectation of $10.164 billion. That, however, is still above consensus at $10.122 billion and Netflix’s guide of $10.128 billion. Reese has Q4 EPS at $4.31 (the same as before) vs. the Street’s $4.20 forecast and the company’s guide of $4.23.
“With global content creation, balancing costs, and increasing profitability, Netflix has reached the right formula,” Reese summed up. “We believe Netflix will continue to expand profitability and generate increasing free cash flow.”
With these positive projections underpinning her analysis, Reese assigns an Outperform (i.e., Buy) rating for NFLX, while her $950 price target implies shares will gain another 11% in the months ahead. (To watch Reese’s track record, click here)
20 other analysts join Reese in the bull camp and with an additional 7 Holds and 2 Sells, NFLX stock claims a Moderate Buy consensus rating. The $951.6 average target closely mirrors Reese’s objective. (See Netflix stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
