Important points
- Netflix shares plunged on Friday after the streaming giant gave a weaker-than-expected revenue outlook and announced it would stop reporting subscriber numbers.
- But analysts said Netflix could be in a good position due to its strong fundamentals and dominance in the streaming market.
- Bank of America analysts raised their price target on the stock, citing the latest forecast numbers and several growth factors.
- Wedbush said the focus on financial metrics rather than membership reflects the company’s evolution into a low-growth, high-margin business.
Streaming giant Netflix (NFLX) reported first-quarter profits that beat analysts’ expectations, but gave a weaker-than-expected revenue outlook and announced it would no longer report subscriber numbers starting in 2025. Shares of Netflix (NFLX) fell more than 8% on Friday as a result.
However, analysts remain bullish, saying they “welcome” future subscriber reporting changes, citing Netflix’s dominance in the streaming space and strong fundamentals, with some analysts raising price targets. I didn’t lose my stance.
Bank of America raises price target due to updated full-year forecasts
Bank of America analysts raised their price target on the stock from $650 to $700, citing the latest forecast numbers and several growth factors.
Netflix has updated its full-year 2024 revenue growth forecast, saying the company is “expected.”[s] The company said only that it expects “healthy double-digit revenue growth” in the final quarter of 2023. The company also updated its full-year 2024 operating margin forecast from 24% to 25%.
Bank of America said the price target increase “reflects our updated CY25E EBITDA forecast of 25x (unchanged),” which reflects Netflix’s “world-class brand, a world-leading “This is underpinned by our growing subscriber base, our position as an innovator, and our growing visibility as a growth driver.”
Drivers include a growing advertising business, continued benefits from Netflix’s crackdown on password sharing, strong content plans for 2024, subscriber growth in developing markets, and pricing.
Macquarie welcomes shift away from reporting subscriber growth
“Investors will complain about the lack of metrics they use, but [Macquarie] welcome[s] Macquarie analysts note that Apple (AAPL) has made similar changes to its reporting metrics to focus on fundamental metrics, away from the iPhone alone, and noted that “Netflix has seen more meaningful engagement metrics and more “We expect it to offer a lot of advertising,” Macquarie analysts said. Display stage-related information over time.
The company maintained its “outperform” rating, saying the streaming company has “ample upside” as it “builds its advertising business and can selectively increase prices.”
Changes to subscriber reporting reflect evolution into a “low-growth, high-revenue business,” Wedbush says.
Analysts at Wedbush say Netflix’s decision to stop reporting subscriber metrics reflects our frequent belief that Netflix’s transition from a high-growth, low-margin business to a low-growth, high-margin business is inevitable. “I feel this is consistent with what I have repeatedly asserted,” he wrote.
The company maintained its “outperform” rating, saying, “Netflix has hit on the right equation: producing content on a global scale, balancing costs, and increasing profitability.”
Before the earnings call, Wedbush removed Netflix from his “best ideas” list, with analysts saying it would be “much harder for Netflix to impress investors in 2024 than in 2023.” He said he expected that.
Netflix stock was down nearly 9% to $555.62 as of 3:15 p.m. ET on Friday. Despite Friday’s decline, the stock is up nearly 15% so far in 2024.
