Netflix (NFLX) has solidified its dominance in the streaming world, defying skeptics and emerging as a standout stock in September 2024. While not officially part of the “Magnificent Seven” tech giants, Netflix has established itself as a leader. With a remarkable 39.6% surge in its stock price this year, NFLX is surpassing most members of the prestigious Mag 7 club, trailing only Nvidia (NVDA) and Meta Platforms (META) following a turbulent period for tech stocks.
Market analysts foresee further growth on the horizon. Pivotal Research recently reiterated its Buy rating on Netflix, upping its price target from $800 to $900, citing the company’s ability to leverage its scale and expand its subscriber base. Similarly, Evercore raised its price target to $750, highlighting Netflix’s strong market positioning and future growth potential.
Netflix’s Current Market Dominance
Netflix’s ascent to streaming supremacy is supported by impressive figures. In the Q2 2024 earnings report, Netflix exceeded Wall Street’s expectations across the board. The company reported a revenue of $9.56 billion for the second quarter, a 17% increase from the previous year. Net income surged by 44% to $2.15 billion, with diluted earnings per share (EPS) of $4.88 surpassing estimates.
A standout performer was Netflix’s subscriber growth, with 8.1 million new additions in the quarter, pushing its global total to 278 million. This 16.5% surge in subscribers signals the success of Netflix’s tactics like curbing password sharing and introducing a budget-friendly ad-supported tier. Hit originals like “Bridgerton S3” and “Under Paris” have captivated audiences worldwide, contributing to this remarkable growth.
Reflecting this financial triumph, Netflix’s stock has soared nearly 40% this year. Over the past month alone, the stock surged 10.7%, outpacing the S&P 500 communications sector, which exhibited slight negativity, as well as the broader S&P 500 Index, which rose by 3.3%. This strong performance underscores investor confidence in Netflix’s strategies and future potential.
Netflix stands out in terms of valuation within the streaming sector. Its forward Price-to-Earnings (P/E) ratio of 35.32 is significantly higher than the sector median of 13.49. Similarly, its Price-to-Sales (P/S) ratio of 7.49 dwarfs the sector median of 1.28, indicating that investors are optimistic about NFLX’s future earnings growth.
The Drivers Behind Netflix’s Continued Triumph
Netflix is not just making waves with its latest content; the streaming giant is venturing into live sports and events to expand its viewer base.
A prominent deal is Netflix’s exclusive agreement with WWE to broadcast “Monday Night Raw” starting in January 2025. This groundbreaking $5 billion, 10-year deal marks the first time “Raw” will not air on traditional TV networks, as Netflix aims to tap into WWE’s extensive fanbase and offer live sports entertainment globally.
In parallel, Netflix has inked a landmark three-year deal to air NFL games from Christmas Day 2024 onwards. This move into live football aims to diversify Netflix’s content and attract advertisers, with expectations of attracting millions of holiday viewers and boosting advertising revenues.
For basketball aficionados, Netflix is launching a new series, “Starting 5,” providing an inside look at five NBA superstars during the 2023-2024 season. The series premieres on Oct. 9, catering to hoops fans eager for exclusive content.
Netflix is expanding its horizons significantly to position itself as the go-to platform for diverse entertainment offerings, beyond its signature true crime documentaries and classic films.
NFLX: Analyst Consensus and Projections
As Netflix gears up for its upcoming earnings release on Oct. 16, analysts anticipate an EPS of $5.07, with revenue growth forecasted at 14% year-over-year and an estimated operating margin of 28.1%.
Wall Street’s consensus rating for NFLX is a “Moderate Buy,” with a modest upside of approximately 2.3% to the mean price target of $695.91. Despite this, analysts have recently been revising their price targets upwards, with a potential 17.7% upside to the Street-high target of $800.
Among 39 analysts, 21 recommend a “Strong Buy,” two suggest a “Moderate Buy,” 15 advise a “Hold,” and one recommends a “Strong Sell.”
Moreover, Evercore ISI’s affirmation that Netflix remains a formidable force in the streaming industry underscores the belief in Netflix’s innovative content strategies and expanding subscriber base driving continued growth and profitability.
Conclusion
Netflix’s stellar financial performance, strategic alliances, and positive analyst sentiment make it an enticing investment opportunity in September. With robust earnings estimates, increasing price targets, and effective subscriber base expansion strategies, Netflix is well-equipped to sustain its upward trajectory. As the streaming giant diversifies its content portfolio and adapts to market dynamics, it remains a key player in the industry and a mega-cap stock worth considering this September.