"Squid Game" has been a huge value driver for Netflix.
The South Korean show generated an estimated $900 million in impact value after its 2021 release, Bloomberg reported.
This metric reflects the financial contribution of the series to subscriber growth, retention, and overall platform engagement.
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Within its first four weeks, more than 142 million households watched the show's first season.
Now, "Squid Game Season 2" is hitting Netflix on Dec. 26.
The twists in "Squid Game Season 2" may be a mystery, but one thing is certain: ads.
In late 2022, Netflix launched a cheaper, ad-supported tier priced at $6.99 a month, less than half the cost of its standard ad-free plan. The ad-free offer aimed to attract budget-conscious viewers and compete with other ad-based streaming platforms.
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Now, Netflix is phasing out its basic ad-free plan, which costs $11.99 per month in the U.S. This leaves viewers with a choice: embrace ads for a lower fee or pay for premium pricing.
Netflix's ad-free plans include a $15.49 monthly standard HD video quality plan and a $22.99 premium Ultra HD plan.
While this shift upsets viewers who prefer ad-free streaming, it might boost Netflix’s financials.
Netflix reported Q3 success
In October, Netflix (NFLX) reported an increase of 5 million subscribers during the third quarter, surpassing Wall Street’s estimate of 4.5 million, according to StreetAccount data pulled by CNBC.
Netflix had 282.7 million memberships in total as of Q3.
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For Q3 Netflix earned $5.40 a share, topping analysts’ forecast of $5.12. Revenue was up 15% to $$9.83 billion, beating the company’s guidance and Wall Street’s estimates.
Netflix expects revenue to grow 15% for both Q4 and full-year 2024.
For 2025, Netflix forecasts revenue of $43 billion to $44 billion, representing growth of 11% to 13% from its 2024 revenue guidance of $38.9 billion, driven by an increase in paid memberships and average revenue per membership.
“As we head into 2025, we expect to deliver solid revenue and profit growth by both improving our core series and film offering while investing in new growth initiatives like ads and gaming,” the company said in a shareholder letter.
Analysts raise Netflix stock price targets
JP Morgan boosted its price target on the Los Gatos, Calif., streaming giant to $1,010 from $850 and kept an overweight rating on the shares, thefly.com reported on Dec. 11.
The analyst said subscriptions were growing, "supported by strong content, healthy organic growth, and ramping ad-tier contribution."
App-analytics firm Sensor Tower’s data suggest significant improvement in global download and daily-active-user trends through Q4, the analyst tells investors in a research note.
JP Morgan has raised its estimate of Netflix’s Q4 net subscriber addition to 10 million from 9 million. It also says Netflix's 2025 revenue will be supported by healthy organic and secular growth, ramping advertising contributions, and price increases.
Last week, Citi raised its price target on Netflix to $920 from $725 with a neutral rating.
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The investment firm also says Netflix’s ad tier can drive both incremental subscribers and average revenue per user, which could boost revenue in the coming years.
Netflix stock hit an all-time high on Dec. 11, to roughly $940 in recent trading. The stock price has roughly doubled year-to-date.
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