FAANG behemoth Netflix (NFLX) dominates the U.S. streaming landscape. Established in 1997, it began as a DVD rental and sales platform before transitioning into the digital streaming realm. Netflix offers original series, movies, documentaries, video games, and more through a subscription-based model accessible on TV, mobile devices, and computers. Operating in over 190 countries, NFLX boasts a monumental streaming subscriber base, nearly 260 million strong, cementing its status as the 24th most visited website worldwide.
Netflix shares have surged by 24.4% year-to-date, outpacing the broader S&P 500 Index’s 10.8% return. Currently trading just 4.5% below its 52-week peak.
Netflix unveiled its Q4 results in January, displaying a 12.5% year-over-year revenue leap to $8.83 billion, surpassing Wall Street predictions of $8.72 billion. The revenue surge was propelled by a spike in net subscribers, surging by 13.1 million to 260.3 million, sailing past analysts’ 8.7 million growth forecast.
Operating income soared by 172% year-over-year to $1.5 billion, with the operating margin escalating from 7% to 16.9%, eclipsing the company’s 13% guidance. However, EPS stood at $2.11 per share, missing both analysts’ estimates of $2.22 per share and Netflix’s own EPS projection of $2.15.
In the ongoing Q1 of fiscal year 2024, Netflix estimates revenue of $9.24 billion and EPS of $4.49, exceeding the consensus Wall Street estimate of $4.10.
The Divergent Views of Analysts on Netflix
Evercore ISI recently raised Netflix’s price target from $600 to $640, suggesting a potential 5.7% upside. The firm upheld its “Outperform” rating on the streaming giant, asserting that Netflix can broaden its user base by focusing on tiered subscriptions offering advertising and ad-free choices.
While Evercore ISI’s U.S. surveys showcased neutral consumer sentiment, Japanese surveys leaned modestly positive towards Netflix. The crackdown on paid sharing by Netflix appears to be gaining traction in the international market, according to analyst Mark Mahaney, with extra momentum stemming from mobile users.
Conversely, Wedbush dropped NFLX from its “Best Ideas” list despite maintaining an “Outperform” rating on the stock. The firm expressed skepticism, stating, “Netflix may find it more challenging to impress investors in 2024 compared to 2023,” hinting that positive catalysts are already factored into the current price.
The Wall Street Consensus on NFLX Stock
Analysts collectively rate Netflix as a “Moderate Buy,” with a mean price target of $588.76, slightly below the current stock price. However, Wedbush holds the most optimistic price target of $725, a 19.7% premium.
Out of the 40 analysts covering the stock, 22 advocate a “Strong Buy,” 1 recommends a “Moderate Buy,” 15 suggest a “Hold,” and 2 propose a “Strong Sell” rating for the stock.
