Netflix’s third-quarter outcomes are in, and so are the primary Wall Avenue verdicts on what they imply for the streaming big and its inventory. Most consultants had headed into the earnings report with a bullish mindset regardless of some warnings that the corporate’s elevated market worth might require some persistence earlier than an additional inventory run-up.
Led by co-CEOs Ted Sarandos and Greg Peters and govt chairman Reed Hastings, Netflix ended September with 282.72 million international subscribers. As forecast, quarterly web additions of 5.07 million got here in under the year-ago interval when it had added 8.76 million.
The unique content material launched on the streamer within the third quarter included Emily in Paris season 4, The Good Couple, Beverly Hills Cop: Axel F, A Good Lady’s Information to Homicide, and the fourth and remaining season of The Umbrella Academy.
And for the present fourth quarter, administration late Thursday touted: “We’re excited to finish the year strong with a great fourth-quarter slate, including Squid Game season 2, the Jake Paul/Mike Tyson fight and two NFL games on Christmas Day.” That led Netflix to forecast paid web additions to be larger within the fourth than within the third quarter.
All that led varied analysts to stay to their rankings and a number of other to additional hike their inventory worth targets on the streamer. Netflix shares popped in Friday pre-market buying and selling, leaping greater than 6 % to above $730. But once more, there have been additionally some warnings that the inventory might not have the ability to hold flying excessive.
For instance, TD Cowen analyst John Blackledge reiterated his “buy” ranking on Netflix shares. After just lately boosting his worth goal by $45 to $820, he raised it additional after the earnings replace to $835. “We raised our sub forecast following the third-quarter beat, while tweaking revenue, operating income and earnings per share estimates in ’24 and longer term,” he defined.
Mark Mahaney, analyst at Evercore ISI, additionally reiterated his inventory ranking post-earnings, in his case at “outperform,” and pushed up his worth goal, on this case by $25 to $775 “in the wake of beat and raise third-quarter earnings results.”
He additionally identified “key bullish takes,” reminiscent of “a record high operating margin (30 percent) that appears reasonably sustainable,” a fourth-quarter outlook that “implies robust upside to Street sub estimates – thanks to a super strong content slate,” and the disclosure of “several select price increases, with more to come, we believe.”
BMO Capital Markets‘ Brian Pitz is one other analyst who raised his Netflix inventory worth goal on Friday, boosting it by $55 from $770 to $825. He additionally reiterated his “outperform” ranking in a report entitled “Effectively Executing as Ad Monetization Thesis Remains Intact.”
Pitz highlighted a number of positives, together with “better-than-expected 2025 revenue growth guidance of 11-13 percent (versus BMO’s 11.9 percent)” and his “greater confidence in 10 percent ad revenue mix in 2026,” together with what he known as “best-in-class co-CEOs.” The analyst additionally argued that Netflix’s estimated $18 billion content material spending in 2025 “should onboard incremental users/limit churn.” And Pitz concluded: “Netflix remains a primary beneficiary of the $150 billion of linear ad dollars poised to shift online (we estimate $20 billion in the next three years).”
Guggenheim analyst Michael Morris additionally stays upbeat after elevating his 12-month inventory worth goal from $735 to $810 earlier than the most recent earnings replace. After the report, he maintained his “buy” ranking on Friday, highlighting a key driver of his bullishness in his be aware’s headline: “Expanding content slate to fuel further growth.”
William Blair analyst Ralph Schackart on Friday equally caught to his “outperform” ranking on Netflix with no worth goal. “Better-Than-Expected Profitability Pushes Up Full-Year Margin Expectations,” he highlighted within the headline of his report. “Margin Expansion Continues Into 2025.”
His big-picture conclusion: “We remain optimistic that both this newer [ad] tier and paid sharing will provide tailwinds to [revenue] through the medium term. Overall, Netflix continues to be well positioned to remain a secular streaming winner.” He additionally argued that deliberate subscription worth will increase “will eventually flow through the model to satisfy investors.”
Pivotal Analysis Group analyst Jeff Wlodarczak continues to be the largest Netflix bull on the Avenue, on Friday additional boosting his monetary estimates and his Avenue-high inventory worth goal from $900 to $925 and reiterating his “buy” ranking. “This Is What Winning Looks Like,” the title of his report mentioned.
“Netflix reported yet another strong quarterly result with moderately better than consensus third-quarter subscriber growth, higher-than-forecast third-quarter revenue growth…, much better than expected third-quarter free cash flow and raised ’24 revenue, operating margin and free cash flow guidance,” the analyst highlighted. “In addition, management released strong ’25 revenue and operating income growth forecasts that was exactly in-line with our and consensus expectations, although we believe the operating income growth forecast is likely to prove to be conservative.”
Wlodarczak concluded: “We continue to expect Netflix to be able to generate solid subscriber growth and ARPU growth (price hikes and continuing to ramp advertising offset partially by lower ARPU in developing markets) which should drive solid revenue growth with continuing expanding margins, a powerful combo.”
Laurent Yoon, analyst at Bernstein, stays extra cautious than others with a “market-perform” ranking however he pushed up his inventory worth goal by $155 to $780. “Smooth sailing from here?” he requested within the title of his Friday report.
“There were some concerns around third-quarter net sub adds number against a softer content slate and lapping the paid-sharing efforts,” he famous. “The user growth was indeed disappointing — mostly due to Latin America – yet the worst fears are now behind and the forward-looking commentary was encouraging.”
Yoon concluded by summarizing his present tackle Netflix shares this fashion: “The most common question we’ve received about Netflix has been whether its valuation is ‘expensive.’ Given the updated guidance and confidence around ‘25 and implied ‘26 numbers, we see further upside potential.” And he highlighted: “We can’t think of a realistic bear case in the near-term, and our sentiment remains the same. Happy streaming.”
In distinction, Benchmark analyst Matthew Harrigan stays an enormous Netflix bear, sticking to his “sell” ranking, even whereas elevating his inventory worth goal by $10 to $555. “Undeniable Streaming Excellence Overpriced in Momentum Market, Especially as Paid Sharing Benefits Mature,” he summed up his thesis within the headline of his report.
“Intermediate-term, although likely not near-term, member growth risks vs. our forecast may gear to the downside,” he warned. “Benchmark’s valuation and underlying forecast recognize significant growth while acknowledging increasing competition in video streaming and increasingly significant diversion of consumer activity toward media (TikTok, AR, short-form YouTube videos, etc.) other than long-form video content even as Netflix itself also accommodates to this environment.”
MoffettNathanson analyst Robert Fishman squared up the opposing takes on the place Netflix and its inventory stand proper now. “It has been an indisputable blockbuster run for the company that famously sent Blockbuster to its grave,” he wrote. “It has done so in the face of a strike-impact content slate.” And it has finished so whereas rising its revenue margins.
“Yet, with much of the subscriber growth seemingly representing improved monetization of an existing user base, we question whether the momentum can continue into next year,” he cautioned.
Sure, there may be nonetheless the expansion lever of the corporate’s still-developing advert enterprise. “The other lever at the company’s disposal is pricing, yet, while it is likely that the company still has room to grow here, stalled total time viewed per subscriber may imply stalled pricing power growth as well,” Fishman famous. “The company has spoken to view time per ‘member amongst owner households’ (as in, excluding users previously password-sharing) as being up year-over-year, but it is hard to say the extent to which engagement from those password-sharers factored into the paying subscriber’s value equation.”
What does all that imply? “At a 4 percent estimated 2026 cash flow yield, Netflix’s stock is massively expensive for a company whose own guidance implies a revenue deceleration into 2025 (slowing to 11-13 percent growth from 15 percent this year),” Fishman highlighted. “The company trades at a higher price/free cahs flow multiple (27.9 times) than many other big tech names, including some with faster growth.” One among his charts confirmed Meta at 24.9 occasions, Amazon at 20.5 occasions, and Snap at 19.9 occasions, for instance.
Netflix’s newest outcomes additionally as soon as once more drew curiosity past conventional Wall Avenue analysts. “We estimate that Netflix now accounts for close to 10 percent of total spending on video services in the United States,” wrote Madison and Wall principal Brian Wieser in a be aware. “This compares with around 8 percent of total time spent watching content, indicating the relatively higher value consumers place on Netflix versus alternatives.”
He additionally highlighted additional advert traits. “During the past quarter 50 percent of sign-ups in ads markets chose the ads plan, representing an acceleration from the most recently disclosed figure of 40 percent in each of the first quarter of 2024 and the fourth quarter of 2023,” the professional wrote. “For context around how many households subscribe through ad-supported tier, our analysis of data from Antenna suggests that 12 percent of U.S. subscribers – around 7 percent US TV households – have this plan, approximately double last year’s level. To the extent it is correct, growth from ad-supported members accounts for almost all of the service’s growth in the United States since the tier was launched nearly two years ago.”
