With a market capitalization of $265.92 billion, Netflix, Inc. (NFLX) is a global leader in entertainment. The company serves millions of customers in over 190 countries with an extensive library of TV series, films, and games spanning diverse genres and languages.
NFLX achieved significant milestones in the second quarter of fiscal 2024. It boasted a global streaming paid membership of $277.65 million, marking a robust 16.5% year-over-year growth. This performance underscores the company's strong momentum across revenue, member acquisition, and profitability metrics.
In addition to its core streaming offerings, NFLX is expanding into video game publishing. It aims to launch 80 new titles under the Netflix Stories banner, with plans for monthly releases. These interactive narrative games would leverage the company's vast intellectual property, enhancing viewer engagement and diversifying its content portfolio.
The company is also exploring financial strategies to strengthen its market position, including a potential investment-grade bond sale to refinance $1.8 billion in debt. This move follows recent upgrades by global rating agencies, elevating NFLX’s credit status to investment grade in recognition of its stable financial outlook and strategic growth initiatives.
These developments highlight NFLX’s evolution beyond traditional streaming, positioning itself as a multifaceted entertainment powerhouse with a resilient business model and promising growth prospects in the global media landscape.
Shares of NFLX have grown 7.6% over the past six months and 42.8% over the past year to close the last trading session at $619.37.
Let’s now look at the factors that could influence NFLX’s performance in the upcoming months.
Solid Financials
During the second quarter of fiscal 2024, which ended on June 30, 2024, NFLX’s revenues increased 16.8% year-over-year to $9.56 billion. Its operating income stood at $2.60 billion, up 42.5% year-over-year.
Moreover, the company’s net income and earnings per share rose 44.3% and 48.3% from the prior year’s period to $2.15 billion and $4.88, respectively. Also, as of June 30, 2024, NFLX’s total assets amounted to $49.10 billion, up from $48.73 billion as of December 31, 2023.
Impressive Historical Growth
Over the past five years, NFLX’s revenue has grown at a CAGR of 15.5%. Its levered free cash flow and total assets increased at CAGRs of 6.4% and 10.2%, respectively. Additionally, the company’s EBITDA rose at a CAGR of 35.7% during the same period.
Moreover, the company’s net income and EPS have grown at respective CAGRs of 43.9% and 44.5% during the same time frame.
High Profitability
NFLX’s trailing-12-month EBIT margin and net income margin of 23.82% and 19.54% are 164.6% and 525.8% higher than the industry averages of 9% and 3.12%, respectively. Similarly, its trailing-12-month levered FCF margin of 55.22% is 560.6% higher than the industry average of 8.36%.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 31.57%, 13.78%, and 14.45% favorably compare to the industry averages of 3.42%, 3.66%, and 1.38%, respectively.
Optimistic Analyst Expectations
Analysts expect NFLX’s revenue to increase 14.3% year-over-year to $9.77 billion for the fiscal 2024 third quarter ending September 2024. The consensus EPS estimate of $5.11 for the ongoing quarter also shows a year-over-year improvement of 37.1%.
Plus, the company has surpassed the consensus revenue estimates in all of the trailing four quarters, which is impressive.
Additionally, the company’s revenue and EPS for the current fiscal year (ending December 2024) are expected to grow 14.8% and 59.2% year-over-year to $38.70 billion and $19.15, respectively.
For the fiscal year 2025, Street expects NFLX’s revenue and EPS to increase 12.2% and 20.1% from the prior year to $43.41 billion and $23.01, respectively.
POWR Ratings Reflect Promise
NFLX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NFLX has an A grade for Quality, consistent with its higher-than-industry profitability. Additionally, the stock has a B grade for Sentiment, which is in sync with its favorable analyst estimates.
NFLX is ranked #16 among the 52 stocks in the B-rated Internet industry. Beyond what I have stated above, we have also given NFLX grades for Growth, Stability, Momentum, and Value. Get access to all NFLX ratings here.
Bottom Line
NFLX stands as a global leader in entertainment. Boasting substantial growth in streaming memberships, the company demonstrates robust financial health and a strategic edge in diversifying its content through innovative ventures like interactive narrative games under the Netflix Stories label.
Moreover, with recent strides in financial markets, including potential investment-grade bond offerings, NFLX continues strengthening its status as a top-tier investment, bolstered by its strong profitability and promising growth trajectory in the dynamic streaming landscape.
How Does Netflix Inc. (NFLX) Stack Up Against Its Peers?
While NFLX has an overall POWR Rating of B, investors could also check out these other stocks within the Internet industry with A (Strong Buy) ratings: Meituan (MPNGY), Yelp Inc. (YELP) and Dingdong (Cayman) Limited (DDL). To explore more A-rated internet stocks, click here.
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NFLX shares were trading at $621.33 per share on Tuesday afternoon, down $5.63 (-0.90%). Year-to-date, NFLX has gained 27.61%, versus a 14.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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