When Netflix, Inc. exceeded expectations in its fourth-quarter report, it showcased robust net paid subscriber additions and revenue. The company also raised its first-quarter operating margin guidance, leading to a significant surge in its after-hours trading shares. The impressive results garnered praise from financial analysts and industry observers alike.
Analysts’ Applause
Expressing his astonishment at Netflix’s quarterly report, CNBC Mad Money host Jim Cramer labeled it a “shocker.” “This was one of the more gettable great calls,” he said.
Fund manager Ross Gerber, who oversees Gerber Kawasaki Wealth & Investment Management, echoed the positive sentiment, stating, “Netflix just killed their numbers!” He attributed the success to the introduction of the ad-supported tier and the crackdown on password sharing, noting the willingness of many to pay for subscriptions previously obtained without payment.
Gerber also commended Netflix’s move into live alternative sports events and gaming, particularly highlighting the World Wrestling Entertainment deal. “And now WWF. As Netflix evolves into live alternative sports events and gaming, they continue to add value to subscribers,” he said.
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PT Bump-Up
Following the strong quarterly results, KeyBanc Capital Markets analyst Justin Patterson maintained an Overweight rating on Netflix and raised the price target from $545 to $580, indicating a potential 18% upside.
“Netflix’s paid-sharing and ad product cycles resulted in another quarter of paid net add momentum,” said Patterson.
As net add tailwinds moderate over the coming quarter, price increases and ad monetization can drive low double-digit revenue growth and more than 25% annual earnings per share growth over the coming years, the analyst said.
Although the first-quarter revenue guidance of $9.24 billion was impacted by forex, with the Argentinian Peso accounting for a three-point forex headwind, the analyst said the company raised its first-quarter operating margin guidance from 22-23% to 24%.
KeyBanc adjusted its 2024 and 2025 revenue estimates upward by 1% each and raised earnings per share estimates by 4% and 6%, respectively, citing robust member growth.
“While we still expect annual net adds to moderate from 2023’s 29.5M, we are becoming more confident 15M-20M net adds are a sustainable run rate,” he said. He was also positive about growth reaccelerating before more substantive price increases.
In after-hours trading, the stock jumped 8.66% to $534.80, according to Benzinga Pro data.
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