Netflix (NASDAQ: NFLX) shares jumped more than 6% on Friday, buoyed by investor optimism that its robust content lineup will help the streaming giant maintain upbeat subscriber growth even as the boost from its password-sharing crackdown wanes.
The company, widely seen as the winner of Hollywood’s streaming wars, was set to add around $18 billion to its market value of about $295 billion, based on premarket share movements.
It topped estimates for quarterly subscriber additions by more than 1 million and projected higher sign-ups sequentially for the last three months of the year when the Korean drama “Squid Game” returns.
The company’s profit and revenue also beat estimates, a positive sign for its efforts to shift investor focus away from subscriber growth amid what some analysts see as an inevitable slowdown in sign-ups after the success of its password-sharing curbs.
The 5.1 million users Netflix added in the third quarter were below the 8.76 million additions in the year-ago period.
“The third quarter showed the slowdown in subscriber growth that we’ve been expecting, but Netflix has other areas of opportunity to continue boosting its financial performance,” Morningstar analyst Matthew Dolgin said.
Part of the push includes price increases. After increasing fees in Japan, the Middle East, and Africa as well as parts of Europe in recent weeks, Netflix (NASDAQ: NFLX) is hiking prices in Italy and Spain, and some analysts expect a similar move in the U.S. next year.
“Netflix did not announce any price change, though (it) did hint that there is room to take price with stronger engagement,” Bernstein analysts said.
The ad-supported tier also showed signs of progress as it accounted for more than 50% of sign-ups in countries where it was available in the third quarter, though Netflix does not expect advertising to become a primary growth driver until 2026.
At least eight analysts raised their price targets on the stock following results, bringing the median target to $750 from $706.38, according to data compiled by LSEG.
So far this year, Netflix (NASDAQ: NFLX) stock has risen about 41.2%, Disney (NYSE: DIS) has been up 6.9%, while Warner Bros (NASDAQ: WBD) has shed about 31%.
Netflix is betting on a strong line-up including the new “Knives Out” movie and the latest season of “Stranger Things” to draw subscribers.
“Peers in the legacy media space are losing money hand over fist, meaning Netflix can push its advantage in content creation while others can’t stomach allocating more capital,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
(Source: Reuters)
Maria Reed is a financial journalist with a passion for covering US equities. She joined the ABBO News team in June 2023. Maria holds an M.S. degree in International Economics and Finance from Otto-von-Guericke University in Magdeburg and is a CFA Level 2 candidate.
