ii view: Netflix reports record new subscribers
The streamer’s push to accelerate growth continues to blossom with shares in this media mammoth up 79% over the last year. Buy, sell, or hold?
22nd January 2025 11:14
by Keith Bowman from interactive investor
Fourth-quarter results to 31 December
- Added 19 million net new subscribers to a total of 301.6 million
- Revenue up 16% year-over-year to $10.25 billion (£8.3 billion)
- Earnings per share (EPS) of $4.27, up from $2.11 per share
Guidance:
- Expects first-quarter revenues of growth of 11%
- Expects full-year 2025 revenues to grow between 14% and 16% to between $43.5 billion and $44.5 billion
ii round-up:
Content such as the Mike Tyson versus Jake Paul boxing match and NFL football games helped streaming giant Netflix Inc (NASDAQ:NFLX) add a record 19 million new subscribers during the final quarter of 2024.
Paying global subscribers exceeded 300 million beat Wall Street estimates for an increase to 291 million, with gains in both revenues and earnings surpassing analyst expectations.
Shares in the Nasdaq 100 company soared more than 10% in after-hours US trading having come into this latest news up by 79% over the last year. The Walt Disney Co (NYSE:DIS), where subscribers total over 170 million, gained 14% over the last year. The tech heavy Nasdaq 100 index is up 24% over that time.
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Netflix will from now on no longer report subscriber numbers as it looks to focus on revenues and earnings.
Revenues for the fourth quarter to 31 December rose 16% to $10.25 billion (£8.3 billion), causing earnings to more than double year-over-year to $4.27 per share.
The California headquartered streamer now expects currency adjusted revenues for the 2025 year ahead to grow between 14% and 17% to $43.5-44.5 billion. That’s up around $500 million from management’s previous forecasts, driven by the success of growth initiatives including advertising and sports streaming.
Netflix will occasionally detail subscriber numbers going forward when their hit key milestones.
Broker Morgan Stanley reiterated its ‘overweight’ on the shares post the results, highlighting Netflix’s 300 million subscribers which equates to 40% of the global addressable broadband household market of 750 million. The broker also raised its estimated fair value price to $1,150 per share from a previous $1,050.
First-quarter results are likely to be announced mid-to-late April.
ii view:
Netflix started its online streaming service in 2007, nearly a decade after it began a DVD-by-mail movie rental service. Geographically, North America generated its biggest slug of revenues during this latest quarter at 44%. That was followed by Europe, the Middle East, and Africa at 32%, with the balance of 24% split almost evenly between Latin America and Asia Pacific.
For investors, pressure on consumer spending, given heightened borrowing costs, should not be overlooked. A move to exclude customer subscription numbers arguably reduces investor transparency. Costs for businesses generally remain elevated, while unlike competitors such as Apple Inc (NASDAQ:AAPL), Comcast Corp Class A (NASDAQ:CMCSA) and ITV (LSE:ITV), Netflix does not currently pay a dividend.
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More favourably, management initiatives to reignite growth do appear successful given this latest record quarter for new subscribers. A lower cost plan including ads does ease the cost for financially pressed customers. A robust balance sheet and expected free cashflow of $8 billion over 2025 support ongoing investment, while its gaming business following the previous acquisition of a video games maker remains in its infancy.
On balance, and despite ongoing risks, established strong viewing engagement and the continued global switch from linear TV to streaming, should continue to benefit this now established giant of the media world.
Positives:
- Management initiatives like advertising
- Geographical diversity
Negatives:
- Intense competition from Disney, Apple and others
- Subject to currency movements given overseas customer base
The average rating of stock market analysts:
Buy
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