Netflix Stock Soars as Earnings Exceed Expectations and Subscription Numbers Surge
Netflix, the world’s leading streaming service, saw its stock surge by as much as 16% on Thursday following the release of its quarterly earnings report. The company reported earnings that beat expectations on both the top and bottom lines, while also announcing a significant increase in subscriber additions.
In the latest quarter, Netflix added nearly 9 million new subscribers, surpassing analysts’ projections. This surge in subscribers was a welcome surprise for Wall Street, and many investors were pleased with the impressive performance. As a result, the company’s stock price experienced a significant boost.
Moreover, Netflix made another key announcement during its earnings report – it would be raising prices in select markets. The US, UK, and France will all see increases in subscription costs. This move was well-received by analysts, who recognized it as a positive development for the company’s revenue growth.
MoffettNathanson analyst Michael Nathanson highlighted the price hikes as the most significant surprise in Netflix’s report. According to Nathanson, increasing prices not only encourages new members to sign up for the more affordable ad-supported plan but also boosts the average revenue per membership among subscribers who are less sensitive to price changes.
Netflix’s Basic and Premium plans in the US will now cost $11.99 and $22.99, respectively, up from $9.99 and $19.99. Meanwhile, the $6.99 ad-supported plan and $15.49 Standard plan will remain at the same price point.
Nathanson, who maintained a Neutral rating and $390 price target for Netflix’s stock, revised his revenue projections for the fourth quarter and full-year 2024, increasing them by 2.6% and 3.5%, respectively, due to the anticipated effects of the price hikes.
The analyst also estimated that average revenue per membership would rise by 8% to 9% in the three markets affected by the pricing changes, assuming no major changes in subscriber behavior. Netflix had previously reported a 1% decrease in average revenue per membership in the third quarter, and it expects the pricing adjustments to significantly boost this metric in the coming quarters.
Nathanson further noted that Netflix’s report included numerous positive surprises across various 2023 and 2024 metrics. These surprises are expected to have a significant impact on the company’s free cash flow and earnings per share in 2023 and 2024. Consequently, this positive outlook is likely to stabilize the recently turbulent stock price of Netflix.
Despite the strong performance of Netflix’s stock this year, gaining over 30% year-to-date, it has encountered a 15% decline over the past three months. However, the latest earnings report, with its impressive subscription growth and successful price hikes, has generated renewed optimism among investors.
In conclusion, Netflix’s better-than-expected earnings, coupled with the substantial increase in subscriber additions and the anticipation of higher average revenue per membership, have yielded a remarkable surge in the company’s stock price. With the implementation of strategic pricing changes and positive outlook for future growth, Netflix seems well-positioned to continue dominating the streaming industry.