In relation to streaming video, there’s Netflix (NASDAQ: NFLX) — after which there’s all people else. The corporate is the undisputed pioneer in internet-delivered tv, and it stays the one to beat in lots of respects. Whereas the streaming wars have largely pale from sight in recent times, Netflix continues to be the dominant participant within the house.
Netflix hit a brand new all-time excessive this week, surpassing $700 per share and quietly eclipsing its earlier watermark set in late 2021. This provides to its already monumental good points. Since its IPO in early 2002, Netflix inventory has soared 63,725% as of Wednesday’s shut.
Whereas Netflix has largely stayed out of the limelight in recent times, there’s motive to imagine the inventory nonetheless has additional to climb.
Picture supply: Getty Photographs.
1. Netflix’s promoting enterprise is rising like gangbusters
Earlier this month, Netflix made a splash when the corporate revealed the outcomes of its “upfronts.” This age-old follow brings collectively tv community executives and main advertisers. Throughout these annual conferences, “media firms attempt to promote the majority of their industrial stock — normally as a lot as 70% to 80% — forward of their subsequent cycles of programming,” in accordance with leisure trade publication Selection.
Netflix walked away from this yr’s occasion netting advert gross sales good points of 150% yr over yr as its ad-supported plan gathers steam. Advertisers had been attracted by a number of the firm’s flagship programming, and its ongoing foray into reside occasions additionally contributed (extra on that in a bit).
2. Loads of hit reveals
What attracted advertisers — and continues to drive subscription development — is Netflix’s hit reveals, and there is a lot to select from. Squid Sport tops the record of the corporate’s hottest collection, as does Wednesday. Different perennial favorites embrace Stranger Issues, Bridgerton, Cash Heist, The Crown, and Umbrella Academy.
More moderen favorites embrace Outer Banks, American Homicide, Ripley, Child Reindeer, and Emily in Paris. There are a lot extra, however you get the concept.
3. Extra sports activities programming
One of many extra notable adjustments in latest reminiscence is Netflix’s shifting view of reside sports activities. For a very long time, the corporate caught to sports activities documentaries, however its technique is evolving.
Netflix hosted its personal golf match and tennis match, dubbed The Netflix Cup and The Netflix Slam, respectively, because it dipped its toe into sports activities programming. It will need to have favored what it noticed.
Earlier this yr, Netflix introduced that it could turn into the unique residence of WWE’s Uncooked starting in January 2025. Uncooked has lengthy been a staple for wrestling followers, considered by greater than 1 billion households worldwide in 25 languages, in accordance with the corporate. Earlier than its transfer to Netflix, Uncooked known as Comcast‘s USA Community residence, the place it reigned because the channel’s greatest draw.
The opposite large sports activities headline is that Netflix will give soccer followers a giant Christmas current. On Dec. 25, 2024, the corporate will broadcast two of the Nationwide Soccer League’s (NFL) greatest vacation gridiron clashes: the Tremendous Bowl LVII-winning Kansas Metropolis Chiefs versus Pittsburgh Steelers, in addition to the Baltimore Ravens versus Houston Texans. The corporate additionally famous that it could host at the very least one recreation every on Christmas Day 2025 and 2026.
New viewers would possibly come for the soccer and keep for the opposite leisure.
4. Rising subscriber base
The important thing to Netflix’s success has at all times been — and can at all times be — its means to draw subscribers, both to the corporate’s full-priced tier or its cheaper ad-support tier. Regardless of sturdy competitors over the previous few years from the likes of Amazon Prime Video, Walt Disney‘s Disney+, Hulu, and Warner Bros. Discovery, amongst others, Netflix stays the king of streaming video.
Within the second quarter, Netflix grew its streaming paid memberships to 278 million, up 17% yr over yr. Actually, its year-over-year subscriber development has accelerated for six consecutive quarters after bottoming out in late 2022. The acceleration is basically because of the addition of its ad-supported tier in late 2022 and its password crackdown in early 2023. Netflix introduced earlier this yr that its ad-supported tier had surpassed 40 million members, serving to gasoline its aforementioned success within the promoting market.
The corporate’s accelerating development suggests Netflix has what viewers need.
5. Rising income and better income
Netflix’s means to draw subscribers and the corporate’s pricing energy have propelled the corporate’s income and income to better heights.
Regardless of the financial headwinds final yr, Netflix grew income by 7% in 2023, whereas its earnings per share (EPS) climbed 21%. This yr is off to a fair higher begin, as income and EPS jumped 16% and 65%, respectively, throughout the first six months of 2024.
This helps for example the great thing about Netflix’s working mannequin, as every new subscriber drops extra income to the underside line.
I am not the one one who thinks so
I am a longtime Netflix bull who believes the world is the corporate’s streaming oyster — however do not take my phrase for it. Wall Avenue is equally bullish concerning the streaming pioneers’ future potential. Of the 46 analysts who provided an opinion in July, 29 rated the inventory a purchase or sturdy purchase, and none really helpful promoting.
Pivotal Analysis analyst Jeff Wlodarczak is among the many firm’s greatest followers, with a purchase score and $800 value goal on the inventory. This represents extra upside of 16% in comparison with Thursday’s closing value.
In a report titled “That is What Profitable Seems Like,” the analyst opines that it’s “abundantly clear that Netflix is demonstrating huge scale because it continues to supply sturdy subscriber outcomes and free money move with the power to speculate to speed up that development.” The analyst goes on to say Netflix “has clearly received the worldwide streaming wars.”
Given the corporate’s determined benefits, trade dominance, and monetary efficiency, it is fairly clear Netflix inventory is a purchase.
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John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Danny Vena has positions in Amazon, Netflix, and Walt Disney. The Motley Idiot has positions in and recommends Amazon, Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Idiot recommends Comcast. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
