Netflix flirts with all-time highs as investors applaud advertising push and invest in live sports
Netflix (NFLX) is closing in on the all-time high it reached in November 2021 as investors applaud the company’s foray into sports and its ad-supported tier continues to gain traction.
Netflix recently won the streaming rights to two NFL games airing on Christmas Day as part of a three-season deal. The company also told advertisers in its May keynote that its ad tier had reached 40 million global monthly active users — a significant jump from the 15 million users the company revealed in November and an increase of 35 million users. compared to the year. ago, period.
The growth comes as the streamer raises prices for its ad-free subscriptions in an attempt to attract more users to its ad-supported offering. Netflix’s crackdown on password sharing also boosted revenue growth and increased the platform’s overall subscriber base, with more than 9 million users added in the first quarter.
On Friday, shares were trading around $685. Shares closed at a record high of $691.69 on November 17, 2021.
Netflix shares are up about 40% year to date, but it hasn’t been an entirely smooth upward trajectory. In April, Netflix said it would stop reporting subscriber numbers early next year, raising concerns about long-term subscriber growth and sending shares tumbling.
The case of the bulls
Still, some Wall Street analysts praised the company’s recent moves to boost revenue growth, with Needham analyst Laura Martin reiterating her Buy rating and $700 price target in a new note published Monday. -fair.
Martin said he is optimistic about the company’s global scale and recent price increases for its premium offerings, along with its ability to bundle other services to reduce customer churn or cancellations of its subscription plans.
The analyst added that she foresees a greater acceleration in revenues due to advertising, which should also expand margins. In the first quarter, Netflix reported operating margins of 28.1% and guided for margins of 24% for the full year 2024 – up from 21% in 2023.
“NFLX represents a premium, global, scalable video platform with a well-known brand and a first-mover advantage,” said Martin. “Margin expansion and increased free cash flow will be key value drivers in 2024 [and] in 2025.”
The company has recently leaned into live events like Tom Brady’s success and expanded into live sports.
Ahead of its deal with the NFL for Christmas Day games, the company announced a 10-year deal with TKO Group Holdings’ WWE (TKO) that will bring WWE’s flagship program Raw, a live wrestling production , for the streaming service from 2025. .
Netflix will also host a live wrestling event between Jake Paul and Mike Tyson in November, after the fight was postponed from its original date in July.
“Investors are generally positive about NFLX purchasing live sports rights as part of its $17 billion content budget as they believe exclusive, high-quality sports content such as WWE, the Tyson vs Paul fight and the N.F.L. , will generate more new subscribers. and longer engagement lengths than new entertainment content,” said Martin.
Earlier this week, the company announced Netflix House, an immersive experience offering live shops, restaurants and attractions based on its popular programming like “Bridgerton” and “Squid Game.”
“They can do innovative things,” Martin told Yahoo Finance of the announcement, describing it as “their version of a theme park.”
“I think the return on capital of some of these things is unknown and unproven. But they are really innovative and I think that’s interesting.”
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, and email her at alexandra.canal@yahoofinance.com.
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