Netflix Stock Analysts Up Price Target on Earnings, Advertising, WWE – The

Netflix CEO Ted Sarandos attends The Netflix Cup, a live Netflix Sports event, along with ‘Squid Game’ characters at Wynn Las Vegas Golf on November 14, 2023 in Las Vegas, Nevada.

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Netflix shares jumped on Wednesday after the streaming giant surprised Wall Street on Jan. 23 by reporting its second-best quarterly subscriber additions ever (13 million) and unveiling a 10-year, $5 billion deal for WWE flagship show Raw, as well as the sports entertainment powerhouse’s content internationally.

The latter allowed the company to make a big splash in the live events content space that it has been targeting. “Expanding into live event programming is something we’ve talked about for quite a while, and this has been in the works, so we used to look at this as fits inside of our $17 billion programming spend now,” said co-CEO Ted Sarandos on its earnings call.

And the streaming giant’s fourth-quarter earnings report showed it ending 2023 with 260 million subscribers worldwide, helped by such original programming as Squid Game: The Challenge, new seasons of Lupin and Sex Education, the Money Heist spin-off Berlin, the conclusion of The Crown, awards season contenders, such as Bradley Cooper’s Maestro and Todd Haynes’ May December, Aardman Animation’s Chicken Run: Dawn of the Nugget, the animated Leo, and Zack Snyder’s Rebel Moon – Part One: A Child of Fire.

The subscriber jump came in well ahead of most Wall Street experts’ expectations and seemingly confirming some analysts’ crowning of Netflix as the “king” of streaming.

The company’s quarterly earnings update highlighted three opportunities ahead: “improving the core (series and film), while broadening our offering (games, live and sports-adjacent programming)”; bringing its advertising business to scale; and deepening “our connection with fans through our marketing, consumer products and innovative new live experiences.”

So Wall Street analysts had a lot to digest and analyze overnight, with most experts coming away with bullish takes on the company led by co-CEOs Sarandos and Greg Peters, along with executive chairman Reed Hastings.

Netflix’s stock was up more than 10 percent in Wednesday pre-market trading as of 8:45 a.m. ET at $544.50, up 10.6 percent. Many analysts felt the need to play catch-up, increasing their stock price targets.

One of them was Macquarie analyst Tim Nollen who also upgraded Netflix shares from “neutral” to “outperform” in a Wednesday report entitled “What’s Not to Like?,” while pushing his stock price target up by $185, from $410 to $595. “Netflix delivered excellent fourth-quarter results and outlook as its efforts to boost subs, revenue and earnings are bearing fruit,” he explained. “Netflix is expanding into the live events business in a big way with the signing of WWE Raw, which can grow its audience and advertising.”

Nollen’s conclusion: “We had been waiting for confirmation that Netflix’s moves were paying off. We have that now, and upgrade to ‘outperform’.”

Wells Fargo analyst Steven Cahall also lauded the latest Netflix updates. In his post-earnings report entitled “Still a Growth Stock,” he reiterated his “overweight” rating on Netflix shares and boosted his stock price target by $190, from $460 to $650. “We thought Netflix might tread water in the first half of 2024 with operating income margins set, paid sharing dwindling and ads scaling,” he explained his call. “Fourth-quarter outperformance indicates there’s a lot of growth/margin still ahead.”

The expert also dissected the WWE deal and management’s commentary that Netflix’s ad tier has become large enough for the company to start retiring its cheapest ad-free option, its basic plan, later this year.

It is “still early innings” for the streamer’s ad business, Cahall argued. “We think ad scale is Netflix’s number 1 priority (excluding its north star of member satisfaction). Price increases, bundles and eliminating the basic without ads tier are key drivers.” Netflix’s ad subs would hit 42 million in 2024 and 75 million in 2025, with ad revenue reaching $1.5 billion and $3.7 billion, respectively, “with ads likely not a stock catalyst until ’25-plus,” Cahall estimated.

“We think the WWE deal accelerates ads, but is not Netflix signaling a pivot toward pricey sports rights,” he concluded, calling it a “play for ad tonnage.”

Pivotal Research Group analyst Jeff Wlodarczak is even more bullish in terms of Netflix’s stock upside. In his report, entitled “This Is What Winning Looks Like,” he reiterated his “buy” rating and boosted his stock price target by $100 to what he described as a Wall Street-high $700. “Netflix has already won the streaming wars, and this type of…