On Tuesday, the company announced price increases in several markets, including the U.S., as part of its strategy to enhance revenue while shifting its focus from merely increasing subscriber numbers to other key performance indicators like sales.
"We thought it was a typo. Netflix defied the odds once again, delivering subscriber additions far beyond even the most unreasonable subscriber bogey," remarked Bernstein analyst Laurent Yoon.
With a market valuation exceeding that of competitors Disney, Comcast, Paramount, and Warner Bros Discovery combined, Netflix was poised to increase its market capitalization by nearly $56 billion, based on premarket trading activity, bringing it to approximately $370 billion.
Last year, Netflix's shares rose over 80%, fueled by its foray into live sports, including a boxing match featuring Jake Paul and Mike Tyson, as well as the airing of popular NFL games on Christmas Day, which featured a halftime show by pop icon Beyoncé.
The Tyson-Paul match became the most-streamed sporting event in history, resulting in the highest number of sign-ups for Netflix since Antenna began tracking such data in 2019. The quarter also showcased strong content offerings, including the second season of "Squid Game" and the successful film "Carry-On."
Netflix's global subscriber count has now surpassed 300 million, solidifying its dominant position in the streaming industry and providing it with greater negotiating power with advertising firms as it seeks to expand its ad-supported services.
"Sports rights can be incredibly expensive and it makes sense that Netflix has opted to go with special events. Such events are also perfect for attracting advertisers keen to reach a large audience," stated Dan Coatsworth, an analyst at AJ Bell.
Coatsworth and several other analysts indicated that Netflix is likely to begin pursuing additional major sports broadcasting rights. The company has already obtained U.S. broadcast rights for the FIFA Women's World Cups scheduled for 2027 and 2031.
NARROW REVENUE BEAT
Despite a strong report, there is a notable concern: the surge in subscribers did not lead to a corresponding increase in revenue. Sales increased by 16%, exceeding estimates by approximately $100 million, while subscriber growth was nearly double what was anticipated.
This modest revenue increase may be linked to subscriber growth in regions with lower average revenue per user (ARPU) and a significant influx of sign-ups for the ad-supported tier, according to Ben Barringer, a technology analyst at Quilter Cheviot.
He also noted that the previously announced price increases, along with those expected to be implemented throughout 2025, should enhance revenue.
This year, Netflix plans to debut new seasons of popular series such as "Stranger Things" and "Wednesday." Additionally, it has commenced streaming "WWE RAW."
At least 20 analysts have raised their price targets for the stock, resulting in a median target of $970, as reported by LSEG data. The stock's 12-month forward price-to-earnings ratio is currently at 35.43, in contrast to Walt Disney's 19.19.