Netflix Earnings Preview: Analysts Raise Stock Price Targets on Ad Tier, Paid Sharing Optimism

Georg Szalai
·7 min read

Netflix is getting ready to kick off the first-quarter 2024 earnings season for Hollywood on April 18, and the momentum of its subscriber growth, advertising tier and password-sharing crackdown will be among the focus areas for investors and Wall Street analysts.

Investors will also keep an ear out for possible commentary on content strategy, including a film division reorganization under new head Dan Lin. Sources have told The Hollywood Reporter that the features division will now be split up by genre — such as sci-fi, rom-com and faith-based. Among Netflix’s first-quarter originals were such series as 3 Body Problem and Avatar: The Last Airbender, and such films as Damsel and Spaceman.

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The company’s stock has been on the upswing so far in 2024, gaining 30 percent year-to-date through Monday to close at $607.15, compared to a 6.7 percent gain in the broad-based S&P 500 stock index. However, several analysts have boosted their stock price targets heading into the latest earnings update.

Management guidance called for first-quarter subscriber growth below the seasonally stronger fourth-quarter gain of 13.1 million, but up from the 1.7 million increase recorded for the first quarter of 2023. The streaming giant had 260 million subscribers as of the end of last year.

TD Cowen analyst John Blackledge, for example, stuck to his “buy” rating on Netflix in a recent report but raised his stock price target by $125 to $725. “We raised first-quarter/full-year 2024 sub estimates and now expect paid first-quarter net adds of 5.11 million, above consensus [of] 4.11 million and reflecting continued paid sharing momentum,” he wrote, attributing the increase to “continued momentum from paid sharing.” He added: “We’ll look for color on Netflix’s monetization efforts and advertising VOD (AVOD) tier.”

Blackledge added, “Netflix is benefiting from a dual tailwind of paid sharing initiatives as well as strong underlying biz demand from a robust, increasingly global content slate. Ad tier adoption is also ramping, with AVOD members growing nearly 70 percent quarter-over-quarter in the fourth quarter 2023, and more than 23 million monthly active users (MAUs) overall.” With the streamer planning to retire its basic tier in the U.K. and Canada in the current second quarter, the expert argued that this “should drive further ad tier momentum.”

The expert also highlighted positive findings from recent research. “Our first-quarter consumer survey shows Netflix remains the top choice for living room viewing, while TikTok has leveled off,” Blackledge wrote, concluding: “We think Netflix’s broad catalog across multiple genres creates a durable advantage over time.”

Morgan Stanley analyst Benjamin Swinburne boosted his earnings estimates, leading him to raise his stock price target by $100 to $700, and maintaining his “overweight” rating on Netflix shares in an April 12 report. In it, he also pushed up his quarterly subscriber growth forecast to 7.5 million. “With shares up over 60 percent since Sept. 30, 2023, this report revisits our ‘overweight’ thesis and explores the opportunities still ahead for the leader in streaming,” he explained.

The expert’s bullish conclusion: “Netflix’s track record includes pivoting from DVD to streaming, scaling the world’s largest studio, and successfully monetizing password sharing. This track record, combined with new call options (ads, games, live sports) and a 25 percent-plus earnings per share compound annual growth rate, supports a premium multiple.” He also highlighted: “Our analysis suggests that content from outside the U.S., original programming, and a deep library may all be under-appreciated competitive advantages.”

Speaking of “the Netflix content advantage,” Swinburne wrote: “Content quality is subjective, but what is not subjective are Netflix’s structural competitive advantages. These include 1) developing, producing, and/or sourcing content from outside the U.S., 2) the depth and breadth of engagement across titles, and 3) the benefits its vertically integrated model delivers through original programming. In aggregate, these advantages reinforce our bullish view in the long-term growth and return on capital for the business.”

Pivotal Research Group analyst Jeff Wlodarczak sees even more upside in Netflix shares, on which he also has a “buy” rating. “We are raising our year-end ’24 Netflix target price $65 to a Street-high $765 driven primarily by a combo of higher ’24 and beyond subscriber/average revenue per user (ARPU) forecasts,” he wrote in an April 5 report. “These higher forecasts are a result of continued solid momentum in the core business and what we view as the attractive absolute and relative value that Netflix service is offering to consumers, leading to what we view as material medium-/long-term upside from current ARPU levels,” he explained.

The Pivotal expert raised his 2024 subscriber growth forecast from 18.2 million to 19.5 million, compared with what he mentioned as the Wall Street consensus expectation of 19.9 million. “By year-end ’30, we are now assuming 356 million total paying subscribers versus 347 million previously,” he added. “Netflix has won the streaming wars, and their continued strong subscriber/ARPU and free cash flow generation should drive the shares higher,” Wlodarczak concluded.

Evercore ISI analyst Mark Mahaney in a recent report increased his Netflix financial estimates for 2025 and raised his stock price target by $40 to $640, while reiterating his “outperform” rating. In an April 12 first-quarter preview, Mahaney said he forecasts 4.0 million subscriber gains for the period. “We believe the investor expectations are likely in the 7-9 million net adds range,” he wrote. “We view this level as possible, though we have limited confidence as to whether this range is beatable.”

Oppenheimer analyst Jason Helfstein maintained his “outperform” rating on Netflix shares with a $725 price target in an April 11 report. “While investors [are] expecting first-quarter net adds roughly two times Street on paid sharing/ad-tier tailwinds, we think paid sharing will have a longer tail than initially believed, with only 20 percent of the 100 million opportunity captured to date,” he explained. “Notably, mobile password sharing restrictions only recently went into effect in March, and advertising monthly active users disclosures indicate ad tier membership growth is accelerating. Meanwhile, we believe average revenue per member estimates remain conservative, only factoring in the October price increase and no benefits from paid sharing/additional geographies.”

In addition, the licensing of such programming hits as Suits and more Hollywood giants looking at licensing deals with Netflix for their content will be a financial benefit, Helfstein highlighted. “The higher mix of licensed content is bullish for margins, free cash flow conversion, and share buybacks,” he concluded.

Wedbush Securities analyst Michael Pachter forecasts global net subscriber growth of 8.5 million in the first quarter, well ahead of Wall Street consensus estimates. He maintained his “outperform” rating with a $725 stock price target on the streamer. “Netflix has carefully crafted its current content slate with a balance of originals and licensed content, allowing it to manage content costs while remaining the leader in content consumption among streaming peers,” he explained. “We think Netflix has reached the right formula with global content creation, balancing costs, and increasing profitability. We expect Netflix to continue to expand profitability.”

Pachter also shared his take on where the company’s ad tier push stands. “We expect Netflix to report ongoing growth in the advertising tier with less dilution as average ad tier revenue approaches parity with the ad-free tier,” he argued. “The biggest benefit of the ad tier is that it limits churn. Still, Netflix has positioned itself to accelerate ad tier accretion into year-end and 2025 as it improves its advertising solutions and targeting and expands partnerships.” Swinburne also is keeping an eye and ear out for possible news on sports programming plans.

“We see live sports as a significant total addressable market expander for Netflix and expect the company to build on top of its WWE Raw investment announced earlier this year,” Pachter wrote. “We note that the NBA’s exclusive negotiating window with its existing partners expires in a couple weeks and see Netflix as a dark horse to secure ancillary rights such as the recently launched and successful in-season tournament.”

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