On Wednesday, Needham analysts maintained a bullish stance on Netflix (NASDAQ:NFLX) shares, significantly raising the price target from $800 to $1,150, while reiterating a Buy rating. The upgrade follows Netflix's impressive performance in the fourth quarter, where the company reported a substantial increase in subscribers.
According to InvestingPro data, Netflix has delivered an impressive 79% return over the past year, with the stock currently trading near its 52-week high of $941.75. Based on InvestingPro's Fair Value analysis, the stock appears to be trading above its intrinsic value.
Netflix shares surged in after-hours trading on Wednesday, climbing 13% as the company reported adding 18.9 million net subscribers in the fourth quarter, far surpassing the consensus estimate of 8.4 million. This growth was attributed to a combination of factors, including a strong content lineup, the introduction of live sports, and a crackdown on password sharing. The entertainment giant, now valued at $371.75 billion, maintains strong financial health with a "GREAT" rating from InvestingPro, which offers 14 additional exclusive insights about Netflix's performance and outlook.
The company's Average Revenue Per User (ARPU) also showed strength during the quarter. However, Netflix announced it will no longer disclose subscriber or ARPU figures going forward. The robust subscriber additions were partly driven by the success of two NFL games aired on Christmas Day 2024, which drew an average of 30 million viewers per minute and contributed to an over-delivery of 3 million subscribers in the UCAN region. The remaining 7 million subscriber increase over estimates was attributed to other factors not related to the NFL.
The introduction of an advertising tier accounted for 55% of Netflix's subscriber additions in the fourth quarter across the 12 countries where the service is available. Subscribers to the ad-supported tier grew by 30% quarter-over-quarter. Advertising revenues doubled year-over-year in 2024, with guidance suggesting a potential doubling again in 2025. Netflix recently launched its own ad server in Canada and plans to expand this to the United States in April.
In light of these developments, Needham analysts have reiterated their positive outlook on Netflix, increasing their estimates for fiscal years 2025 and 2026, in addition to the price target hike. The firm's analysts underscore the company's strong performance and the expected continued growth in advertising revenue as key drivers of their optimistic valuation.
With revenue growing at 14.8% and analyst targets ranging from $550 to $1,250, investors seeking deeper insights can access Netflix's comprehensive Pro Research Report, available exclusively on InvestingPro, along with detailed financial metrics and expert analysis.
In other recent news, Netflix's fourth-quarter earnings in 2024 exceeded expectations in terms of revenue and operating income, leading to several financial firms adjusting their views. Goldman Sachs raised its price target for Netflix to $960, maintaining a Neutral stance, while Bernstein SocGen Group increased its price target to $975. BofA also revised its target to $1,175, all citing Netflix's consistent growth across all markets.
The company's robust performance has been driven by strong revenue growth, subscriber expansion, and increasing operating margins. Netflix ended the year with a 16% year-over-year revenue growth, adding more than 40 million subscribers. This growth was uniformly distributed across all regions, validating Netflix's tailored strategies for market penetration.
Morgan Stanley (NYSE:MS) raised its price target for Netflix to $1,150, emphasizing the company's potential for long-term earnings due to its ability to fund business investments. Deutsche Bank (ETR:DBKGn) also raised its price target to $875, anticipating a rise in earnings and free cash flow based on a higher subscriber forecast.
Furthermore, Netflix's advertising-supported tier is showing promise, with projections to double its ad revenue in 2025. The company's recent developments include a focus on developing original content and enhancing user experience, a strategy supported by the robust financial health of the company. The streaming service provider has also announced price increases for most of its subscription plans in the United States, Canada, Portugal, and Argentina.
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