Netflix shares surged by more than 11% on Friday, closing at a record high of £763.89, after the streaming giant released an upbeat quarterly earnings report, accompanied by positive forecasts for the months ahead.
The company’s quarterly revenue came in at £9.83 billion, slightly surpassing expectations of £9.78 billion. The big driver behind Netflix’s success this quarter was its ad-supported subscription tier, which saw a notable boost in subscribers, offering a fresh wave of optimism for investors.
This surge in share price follows Netflix’s announcement of an impressive 5.07 million new subscribers, well above the 4.5 million analysts had predicted. Many had questioned whether Netflix’s crackdown on password sharing would pay off, but the numbers suggest it’s continuing to bring in fresh subscribers.
The real standout, however, was Netflix’s ad-supported plan, which saw a 35% increase from the last quarter and now accounts for over half of all sign-ups in the regions where it’s available.
Looking forward, the streaming giant provided strong guidance, with fourth-quarter revenue expected to rise by 14.7%, hitting £10.13 billion. Additionally, Netflix is forecasting revenue for next year to be in the range of £43 billion to £44 billion, representing a growth of over 11% compared to this year’s estimates of £38.9 billion.
Several financial analysts have since raised their price targets for Netflix. UBS bumped its target from £750 to £825, pointing to the company’s ability to balance expansion while investing in ads, gaming, and live content. Bank of America also increased its target from £740 to £800, citing the multiple growth opportunities Netflix has heading into 2024.
“In our view, Netflix remains one of the best positioned companies within media and has several growth drivers,” analysts said in a note on Friday.
Morgan Stanley, equally bullish, raised its price target to £830 from £820. Analyst Benjamin Swinburne suggested Netflix has the potential to increase its earnings by 20-30%, as it makes strides in gaming, live events, and advertising.
Swinburne also reaffirmed Morgan Stanley’s long-term price target of £1,050, which would mean a 37% increase from the current share price. Speaking with CNBC, he highlighted Netflix’s cash flow advantage over competitors, saying: “They’re going to generate about $50 billion of free cash flow over the next four years. That gives them tremendous ability to invest back in the business at levels that really, frankly, their media competitors can’t.”