Netflix Stock Sized Up By 7 Analysts Post Q1 Results: 'Pivot From A High-Growth, Low-Profit Business To A Slow-Growth, High-Profit Business'

Zinger Key Points
  • Analysts react to the Q1 earnings results from Netflix.
  • A decision by Netflix to stop reporting subscriber figures is a key item discussed.

Analysts weighed in on Netflix Inc NFLX after the company reported first-quarter financial results, and shared how the company fits into the streaming platform sector.

The Netflix Analysts: Bank of America analyst Jessica Reif Ehrlich had a Buy rating and raised the price target from $650 to $700.

Wedbush analyst Alicia Reese had an Outperform rating and a price target of $725.

Macquarie analyst Tim Nollen had an Outperform rating and a price target of $685.

Oppenheimer analyst Jason Helfstein had an Outperform rating and a price target of $725.

Needham analyst Laura Martin upgraded Netflix from Hold to Buy and announced a price target of $700.

Goldman Sachs analyst Eric Sheridan had a Neutral rating and a price target of $600.

JPMorgan analyst Doug Anmuth had an Overweight rating and a price target of $650.

Related Link: Netflix Q1 Earnings Highlights: Revenue Beat, EPS Beat, 9.33 Million Paid Subs Added, Ad-Tier Plan Update And More

Bank of America on Netflix: The first quarter showed that Netflix is "SUBstantially ahead" of other streaming companies, Ehrlich said.

Ehrlich said Netflix's first-quarter results showed the company still had several key growth drivers, including the ramp of the ad-tier, the continued benefit of password sharing crackdown, a strong 2024 content slate, a strong subscriber base in developing markets and the potential of price increases.

The big item that could be weighing on Netflix shares is the company's decision to stop sharing paid subscriber figures and average revenue per member in 2024.


"While still early, the potential concern is subscriber growth had significantly decelerated in 2022 (prior to the implementation of paid sharing), and this could be a harbinger of decelerating subscriber growth in the future," Ehrlich said.

The analyst said Netflix should continue to outperform going forward.

Wedbush on Netflix: The decision to stop sharing subscriber metrics was the key takeaway for Reese.

"This decision is consistent with our oft-repeated assertion that Netflix would inevitably pivot from a high-growth, low-profit business to a slow-growth, high-profit business," Reese said.

The analyst said Netflix has a "virtually insurmountable lead in the streaming wars."

Reese said other streaming companies might fail when trying to copy the Netflix model.

"Netflix continues to benefit from both its password crackdown and advertising tier expansion. The biggest benefit of the ad tier is that it limits churn."

Reese said Netflix could continue expanding its profitability moving further.

"We think Netflix can meet expectations for EPS to more than double between 2023 and 2026, supporting its premium valuation."

Macquarie on Netflix: The streaming company could have an upside to its average revenue per member, Nollen said in a new note.

"Netflix has plenty of upside to ARM as it builds its ad business and can raise prices selectively," Nollen said.

The analyst said the decision to stop reporting some metrics could be seen as a negative, but he welcomes the decision.

"Recall Apple did this with iPhone units to focus the street toward more important fundamental metrics — with the hope that Netflix will provide more meaningful engagement metrics and more ad-tier related info over time."

Oppenheimer on Netflix: Updates on the paid sharing and ad opportunities were key highlights from Netflix in the quarter for Helfstein.

"We expect increased investor support as Paid Sharing proving longer duration subscriber tailwind through '24, with advertising/price increases in '25," Helfstein said.

The business update on ad-tier subs showed growth of 65% from the fourth quarter. The analyst said Netflix is targeting similar monetization on its ad-free and ad-tier plans over time, which could make ads a monetization headwind.

Needham on Netflix: The global scale of Netflix and potential price increases are two items that led to an upgrade on the stock by Martin.

Martin said Netflix is softening on its "no sports" previous comments with the potential to license sports content that could drive profitable growth.

The decision to not report subscriber numbers comes with the company saying that revenue, operating margins and average consumer time on platform will be key metrics.

"Our Buy on NFLX is based on: revenue growth, driven by a) GenerativeAI will most benefit companies that are tech-first, and NFLX qualifies; b) NFLX has global scale, which maximizes the value of its data; c) price increases; and d) ad revs should accelerate rev growth and expand margins," Martin said.

Goldman Sachs on Netflix: The first quarter results provide a "solid start to 2024," Sheridan said in a new investor note.

"Netflix reported a strong Q1 '24 earnings report driven by better-than-expected subscriber growth and signs of pricing increases beginning to impact revenue per member household in some regions," Sheridan said.

The analyst said product initiatives shared by the company could set up for double-digit revenue growth and margin expansion. The question for investors is how much future growth is already priced in, Sheridan said.

JPMorgan on Netflix: The full-year revenue outlook and removing subscriber metrics in the future weigh on Netflix stock, Anmuth said.

The analyst shared that the subscriber addition of 9.3 million paid subscribers was the highest first-quarter figure since the COVID-19 impacted first quarter of 2020.

Paid sharing has been a key to net subscriber growth and Anmuth believes it could continue in 2024, adding around 11 million net adds for the full year.

"Price increases across international markets are likely to follow later this year, which should alleviate ARM pressures from the lack of price increases, country/geo mix, paid sharing & slow advertising monetization," Anmuth said.

The analyst was encouraged by a 65% quarter-over-quarter increase in ad-tier membership growth.

NFLX Price Action: Netflix shares are down 8.71% to $557.36 on Friday versus a 52-week trading range of $315.62 to $639. Shares of Netflix are up 70% over the last year.

Read Next: Understanding Netflix, Disney Market Maneuvers: Decoding The Streaming Strategy

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Posted In: Analyst ColorEarningsEntertainmentUpgradesPrice TargetReiterationTop StoriesAnalyst RatingsAlicia ReeseBank of AmericaDoug AnmuthEric SheridanExpert IdeasGoldman SachsJason HelfsteinJessica Reif EhrlichJPMorganLaura MartinMacquariemedia stocksNeedhamOppenheimerStories That Matterstreaming stocksTim NollenWedbush
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