Netflix (NFLX) is a key headliner of this week's busy earnings calendar. The streaming giant reported fourth-quarter results after Tuesday's close and based on today's price action for Netflix stock, Wall Street likes what they see.
The company reported year-over-year Q4 revenue growth of 12.5% to $8.8 billion, while earnings per share surged to $2.11 from last year's 12 cents. The top-line results came in higher than analysts were expecting, though the bottom-line figure fell short of estimates.
Despite the bottom-line miss, Netflix stock jumped more than 10% out of the gate Wednesday thanks to its stellar subscriber numbers. Specifically, the company added 13.1 million new subscribers globally – its biggest fourth quarter ever for subscription growth – easily outpacing its forecast for roughly 8.8 million.
"The meaningful growth in subscriber numbers is partly a result of password sharing crackdowns, but is also testament to Netflix's ability to keep us glued to screens" says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown. "Full year-margin expectations have been upgraded thanks in part to the higher volume of Netflix fans joining the service, and that nugget of news is being celebrated the loudest."
"We enter 2024 with good momentum," Netflix said in its earnings report. For the first quarter, the company forecasts revenue to 13% to $9.2 billion and earnings to be up 56% to $4.49 per share.
NFLX also expects to spend roughly $17 billion on content in 2024. Part of the company's upcoming programming will include a bigger shift into sports entertainment, including its new 10-year deal with TKO Group Holdings (TKO) that will allow it to stream WWE Raw on its platform beginning in January 2025.
"We thought NFLX might tread water in the first half of 2024 with operating income margins set, paid sharing dwindling and ads scaling," says Wells Fargo analyst Steve Cahall. But the company's "fourth-quarter outperformance indicates there's a lot of growth and margin still ahead."
Should I buy Netflix stock?
The decision over whether or not to buy a stock is a personal one, dependent on your individual risk tolerance and investing goals.
However, Wall Street is overwhelmingly bullish on NFLX stock. Of the 50 analysts covering NFLX tracked by S&P Global Market Intelligence, 22 say it's a Strong Buy, six have it at Buy, 16 call it a Hold, two have it at Sell and one says it's a Strong Sell. This works out to a consensus Buy recommendation.
It's unsurprising to see so much optimism surrounding Netflix stock, given its impressive long-term strength. True, shares lost half their value in 2022 as investors fled riskier assets. Still, NFLX bounced back sharply in 2023, surging 65% – including a nearly 30% gain in Q4 alone. Additionally, the FAANG stock has generated an annual total return of 25.1% over the past 20 years vs 9.6% for the S&P 500.
