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FAANG giant Netflix (NFLX) is the leading U.S. streaming service provider. Incorporated in 1997, it began as a DVD rental and sale service, later transitioning into the digital streaming world. It offers original series, feature films, documentaries, video games, and other entertainment sources through a subscription-based plan on TV, mobile, and computer. Operating in more than 190 countries, NFLX has the biggest streaming subscriber base, with almost 260 million paying members - making it the 24th most visited website in the world.
Netflix shares have spiked 24.4% YTD, breezing past the 10.8% return of the broader S&P 500 Index ($SPX). NFLX now trades just 4.5% off its 52-week high.
Netflix released its Q4 results back in January, where it reported a revenue jump of 12.5% YoY to $8.83 billion, beating Wall Street estimates of $8.72 billion. Revenue was primarily driven by an increase in its net subscribers which grew by 13.1 million to 260.3 million, easily cruising past analysts’ 8.7 million growth prediction.
Operating income spiked 172% YoY to $1.5 billion as the operating margin rose from 7% to 16.9%, exceeding the company’s guidance of 13%. However, EPS came in at $2.11 per share, which missed analysts’ estimates of $2.22 per share, and also fell short of Netflix's own EPS guidance for $2.15.
For the current Q1 of fiscal year 2024, the company guided for revenue of $9.24 billion on EPS of $4.49, which topped the consensus Wall Street estimate of $4.10.
Analysts Debate Over Netflix Catalysts
Netflix landed a price target hike earlier this month, as Evercore ISI raised its target from $600 to $640 - implying a 5.7% potential upside from here. The firm maintained its “Outperform” rating on the streaming giant, and said Netflix can still expand its current user base, thanks to its focus on tiered subscriptions that offer advertising and ad-free options.
Surveys conducted by Evercore ISI in the U.S. showed consumers to be “largely neutral,” while the Japan survey showed “modestly positive” for Netflix. The survey also indicated Netflix’s crackdown on paid sharing has “legs” in the broader international market, says analyst Mark Mahaney, with additional tailwinds coming from mobile users.
On the other hand, Wedbush just removed NFLX from its “Best Ideas” list, even as it backed an “Outperform” rating on the stock. The firm wrote, “we think it will be much harder for Netflix to impress investors in 2024 vs. 2023,” and suggested that positive catalysts are “fully priced in.”
What's the Consensus on NFLX Stock?
Overall, analysts rate Netflix a consensus “Moderate Buy,” with a mean price target of $588.76 - which is below the stock's current price. However, the Street-high price target of $725, which still belongs to Wedbush, is a 19.7% premium.
Among the 40 analysts tracking the stock, 22 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 15 have a “Hold” rating, and 2 have a “Strong Sell” rating on the stock.
