Netflix stock (NFLX) surged to another all-time high, rising as much as 13.6% in early trading Wednesday, as Wall Street analysts praised the company's fourth-quarter earnings results.
Shortly after the opening bell, the stock jumped to just under $1,000 a share as analysts rushed to increase their respective price targets. Pivotal Research increased its target from $1,000 a share to $1,250 – the highest on the Street.
The streaming giant reported a whopping 18.9 million users in the fourth quarter while revenues and earnings also happily beat expectations. This was the largest quarterly subscriber gain in the company's history.
“Q4 results were almost flawless,” Jefferies analyst James Heaney said in a note following the report.
The company also announced a $15 billion stock buyback and boosted its full-year revenue forecast in its after-hours report on Tuesday. Netflix now projects 2025 revenue between $43.5 billion and $44.5 billion, ahead of the previous range of $43 billion to $44 billion.
The strong subscriber gains come as the streamer closes out 2024 with two back-to-back NFL games, a blockbuster boxing match “Jake Paul vs. Mike Tyson,” and the return of “Squid Game.” To that end, the company said price increases will hit the service – which analysts had consistently teased going to print.
The company raised the price of its ad-supported plan to $7.99 from the previous $6.99. Its Standard, ad-free tier will now be $17.99, up from $15.49, while its Premium plan will increase by $2 to $24.99. Users who want to add an additional member will now pay $8.99, an increase of $1.
Wall Street had expected the streaming giant to report just 9.18 million subscribers after it secured 13.12 million paying users in Q4 2023. The company announced last spring it would stop reporting the metric beginning of this year.
“With no more sub-reports to come, investors' focus shifts to Netflix's ability to fund its member base; advertising and price increases are helping to address this,” Macquarie analyst Tim Nollen said on Wednesday.
The company revealed that advertising revenue has doubled in 2024 and management has guided it to double again in 2025. However, advertising revenue is not expected to become the main driver of revenue until 2026.
On the earnings call, Netflix co-CEO Greg Peters said the huge jump in subscribers wasn't driven by one specific event, despite its update. live sports program campaign.
“We've seen consistently across our history that no one title really drives the majority of our acquisition or engagement,” Peters said, noting that live events accounted for a minority of new customers in the quarter.
Analysts were largely encouraged by this commentary with Deutsche Bank's Bryan Kraft writing to clients, “Management was very clear that the strength in 4Q net additions was not disproportionately driven by the Tyson vs. Paul fight, the NFL, or any other title; therefore, we see no reason why the strength will not continue.”
Likewise, the NFL games an average of around 30 million viewers. According to Netflix, this was the most watched Christmas Day ever in the US. The company will continue to double down on sports in the middle of the recent WWE Raw debut. Rumor also swirled the company could bid on UFC rights next.
Netflix said in its shareholder letter that it is not focused on rights for “major regular-season sports packages; instead, our live strategy is about delivering unmissable special event programming.”
Revenue hit $10.25 billion in Q4, beating Bloomberg consensus estimates for $10.11 billion and marking a 16% increase compared to the same period last year. Netflix reported first-quarter revenue of $10.42 billion, missing consensus estimates of $10.48 billion.
Diluted earnings per share (EPS) also beat estimates in the quarter, with the company reporting EPS of $4.27, above consensus expectations of $4.18 and well ahead of the $2.11 EPS figure it reported in the year-ago period. back. Netflix reported fourth-quarter EPS of $5.58, below consensus calls for $6.01.
The Netflix logo is seen on a TV remote control in this photo taken January 20, 2022. REUTERS/Dado Ruvic/Illustration/File Photo/File Photo ·REUTERS / Reuters
Other profitability metrics also came in strong, with operating margin at 22.2% in the fourth quarter and 27% for the full year 2024. Netflix expects Q1 operating margins to expand to 28.2%.
Analysts had expected operating margins to reach 22% in Q4 before jumping to 30% in the current quarter.
“Our business remains highly competitive with many formidable competitors across traditional entertainment and big tech,” Netflix said in its letter. “We are fortunate to have no distractions such as managing declining linear networks and, with our continued focus and investment, have a suitable product / market that is improving worldwide.”
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Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
