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Netflix: Strong Growth Propels Stock to Record High

Netflix recently exceeded expectations in Q4, delivering robust guidance that led analysts to heighten their projections for the stock. As a result, shares are poised to ascend to an all-time high, potentially by mid-year 2024.

Once grappling with post-COVID growth challenges, Netflix has now shifted its narrative to one of leverage. The company is leveraging expanding membership, higher prices, and anticipated ad sales to propel its growth trajectory in 2024.

Despite this positive outlook, the stock’s growth potential is undervalued, especially considering the sustained double-digit top-line growth, margin expansion, and expected all-time high this year.

Trading at only 30 times its 2024 analyst consensus earnings estimate, Netflix is perceived as being undervalued. In this context, a price-multiple expansion could ignite the stock’s rally this year.

Analysts Adjusting Expectations in Netflix’s Favor

Positive sentiment and revised price targets among analysts align with the outlook for higher share prices. The consensus sentiment of 32 analysts tracked by MarketBeat has elevated to a “moderate-buy” from “hold” in the last 12 months, while the price target is on an upward trajectory.

Amid this optimistic shift, the only potential headwind is the consensus target, which implies fair value with the stock at $495. However, analyst activity leading up to the January 2024 report is suggestive of a positive trend, further bolstered by robust Q4 results and guidance, and likely to carry the market to new heights.

Financial Performance Amid Mixed Q4 Results

Netflix had a solid Q4 performance, exceeding consensus expectations for top-line growth. However, non-cash impairments impacted the bottom line, falling short of the target. Nevertheless, the company’s sustainable top-line growth is fueled by paid-sharing, price increases, and the expansion of its core business.

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While experiencing deleveraging due to FX headwinds and European asset valuations, Netflix didn’t raise any alarm for the market. With global membership growing by nearly 13%, the company anticipates a solid performance in 2024.

Moreover, the company’s revenue guidance aligns with analysts’ expectations, but the earnings guidance surpasses them, as Netflix anticipates increased leverage from a growing subscriber base and higher prices. A $5 billion partnership with TKO Group for WWE Raw, set to start in 2025, is among the many deals expected to drive growth.

Technical Outlook: Netflix on a Positive Trajectory

Netflix stock is currently in rally mode and has confirmed the upward trend following the Q4 release. With the stock already up 10% and showing support at a critical level, analysts predict a movement to the $600 range in the near future. Assuming strong results in Q1, the stock could achieve a new all-time high in the first half of 2024.

Netflix-Stock Chart

Source: MarketBeat