Netflix Surges with Record Earnings and Subscriber Growth

Highlights from Netflix’s Fourth Quarter

• Netflix earned $4.27 per share, exceeding the Zacks Consensus Estimate by 1.67%.
• The company expects first-quarter 2025 revenues to reach $10.4 billion, marking an 11.2% increase from last year.
• Netflix boasts 301.6 million paid subscribers globally, reflecting a 15.9% rise year over year.

Netflix Inc. (NFLX) delivered impressive financial results for the fourth quarter of 2024. The company reported earnings of $4.27 per share, surpassing the Zacks Consensus Estimate by 1.67%. This marks a significant 102.4% increase compared to the same quarter last year. Additionally, Netflix brought in revenues of $10.24 billion, which is a 16% increase year over year and also beat expectations by 1.29%.

In Q4, Netflix maintained strong engagement with members watching about two hours daily. The company added 18.91 million subscribers, marking the highest quarterly net gain in its history, compared to 13.12 million in the same period a year ago.

The average revenue per membership rose by 1% year over year, with a 3% increase on a foreign exchange neutral basis. By the quarter’s end, Netflix had 301.63 million paid subscribers in over 190 countries, up 15.9% year over year, helping it maintain a lead over competitor The Walt Disney Co. (DIS).

Strong Revenue Forecast for Netflix

Looking ahead, Netflix expects total revenues of $10.416 billion for the first quarter of 2025, representing an 11.2% year-over-year growth. The management has projected earnings of $5.58 per share for the upcoming quarter. For the whole of 2025, revenues are anticipated to fall between $43.5 billion and $44.5 billion. Furthermore, Netflix is targeting a 2025 operating margin of 29%, an increase from a prior estimate of 28%, and two percentage points higher than the 27% operating margin recorded in 2024.

Positive Estimate Revisions for NFLX Stock

For the first quarter of 2024, the Zacks Consensus Estimate anticipates revenues of $10.5 billion, indicating a 12.1% year-over-year improvement. The expected earnings per share is $5.98, showing a 13.3% increase compared to the previous year. Over the past four quarters, NFLX has consistently exceeded earnings expectations, averaging a 7.2% beat.

Recently, Netflix experienced positive revisions in earnings estimates for 2025. The current Zacks Consensus Estimate projects year-over-year increases of 13.4% and 18.2% for revenues and EPS, respectively. For 2026, the estimates suggest growths of 11.1% and 19.5%.

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Impressive Valuation Metrics for NFLX Shares

Netflix boasts a long-term growth rate of 26.2%, significantly higher than the S&P 500’s growth rate of 12.3%. Additionally, the company has a return on equity (ROE) of 39.5%, surpassing the S&P 500’s ROE of 30.2%. Netflix’s current net margin stands at 22.34%, compared to the S&P 500’s net margin of 12.6%.

Investment Outlook for Netflix

Currently, Netflix has a Zacks Rank of #3 (Hold). The stock price reached an all-time high of $999 on January 22, and it has appreciated by 96% over the past year. Current price targets by brokerages range from $650 to $1,100, suggesting a potential upside of 15.3% and a downside risk of 32%.

Given the upward trend in earnings estimates, many analysts foresee an increase in price targets for Netflix. This could enhance the stock’s risk/reward profile.

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Now may be a suitable time to invest in Netflix, especially on price dips. A systematic investment strategy could help average costs over time. Hold this stock for the long term, as its strong execution in recent quarters and promising forecasts are expected to create additional value, leading to a favorable rise in stock price.

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