Is Netflix Stock Still a Buy After Earnings, Price Hikes?
Analysts were bullish on Netflix stock ahead of its earnings beat, but what is Wall Street saying now? We take a closer look.
Netflix (NFLX) stock surged out of the gate Wednesday after the streaming giant beat top- and bottom-line expectations for its fourth quarter and announced a price hike on certain subscription tiers.
In the three months ending December 31, Netflix said its revenue increased 16% year over year to $10.25 billion, boosted by global streaming paid memberships that were 15.9% higher to 301.6 million. Its earnings per share (EPS) more than doubled from the year-ago period to $4.27.
The results cruised past analysts' expectations. Wall Street was anticipating revenue of $10.1 billion, earnings of $4.20 per share and paid memberships of 290.9 million, according to CNBC.
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For the first quarter of 2025, Netflix said it expects to achieve revenue of approximately $10.4 billion and earnings of roughly $5.58 per share. For the full year, the company raised its revenue expectations by about $500 million to a range of $43.5 billion to $44.5 billion. This represents growth of about 14% to 17% over 2024.
"We enter 2025 with strong momentum, coming off a year with record net additions (41 million) and having re-accelerated growth (16% increase in revenue)," Netflix said. "Moreover, we're in a leadership position in terms of engagement (approximately two hours per paid membership per day), revenue ($39 billion), and profit ($10 billion in operating income) in a market that is continuing to expand."
Netflix is raising prices on certain tiers
Netflix also said it is raising prices on some of its services, according to CNBC. Here's a breakdown of where the increases are occurring and by how much:
- Standard plan without commercials: $17.99 (from $15.49)
- Ad-supported plan: $7.99 (from $6.99)
- Premium plan: $24.99 (from $23.99)
"When you're going to ask for a price increase, you better make sure you have the goods and the engagement to back it up," said Netflix Co-CEO Ted Sarandos said on the company's conference call. "And I feel like what we have going into 2025 is just that."
Netflix's last series of price hikes came in October 2023.
Is NFLX stock a buy, sell or hold?
Netflix has been one of the best stocks for buy-and-hold investors and this impressive price action has been on full display over the past 12 months. Indeed, NFLX share have doubled in value over the past 12 months vs the S&P 500's 26% gain. Unsurprisingly, Wall Street is bullish on the blue chip stock.
According to S&P Global Market Intelligence, the average analyst target price for NFLX stock is $1,020.70, representing implied upside of about 5% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Wedbush is one of the most bullish outfits on NFLX stock and raised its price target to $1,150 from $950 after earnings and maintained its Buy rating.
"While massive subscriber growth was the primary driver in 2024, we expect price increases to drive revenue growth in 2025 and the ad tier to drive revenue higher in 2026," wrote Wedbush analyst Alicia Reese in a January 22 note. "We think Netflix can maintain high-quality production given its healthy cash position against competitors who have to tread more carefully to achieve or maintain some level of profitability."
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