Consumer Discretionary

Netflix’s first-quarter earnings positively surprised the markets with a sharp growth in subscriptions, Swissquote Bank senior analyst Ipek Ozkardeskaya says in a note. The streaming-service platform added more than 9 million new viewers and reported its best start to a year since the pandemic, the analyst highlights. Its performance was boosted by the ban on password-sharing, after Netflix estimated around 100 million people were using an account without paying for it, Ozkardeskaya says. However, comments on its 2Q revenue outlook fail to impress, along with investors’ disappointment regarding Netflix’s decision to stop reporting quarterly subscribers next year, the analyst adds. Shares in premarket trading are down 6.4% at $571.35.

Netflix (NFLX) continues to lead its competitors in the streaming content sector and has made the right decisions to evolve from a high-growth, low-profit business to a slow-growth, high-profit business, Wedbush said in a note on Friday. “We think Netflix has reached the right formula with global content creation, balancing costs, and increasing profitability,” Wedbush said. “We think Netflix will continue to expand profitability and generate increasing free cash flow.” Wedbush maintained its outperform rating and $725 price target, citing the company’s advertising potential for WWE next year, game expansion, product licensing, and growth in viewership. “We think Netflix can meet expectations for EPS to more than double between 2023 and 2026,” Wedbush said. Another dimension of Netflix’s evolution is the decision to stop reporting quarterly subscriber numbers and instead focus on regional revenue. “The company is unlikely to be challenged by competitors, and we think it has already ‘won’

Netflix’s planned shift away from quarterly membership numbers is a material change but giving major subscriber milestones “will be enough for long-term investors to continue to monitor the metric,” says New Street Research’s Dan Salmon in a note. Netflix, which will shift its approach starting in 1Q25, will add annual revenue guidance to offset the lost quarterly visibility. Salmon notes he’s eager to see what milestones get announced and estimates 15 million paid net additions in 2025, which will taper down to a little under 10 million in 2030. Shares decline 6.8% to $569 in premarket trading following softer-than-expected revenue outlook for the current quarter.

CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows: We think NFLX made a mistake by disclosing it will remove subscriber data starting in Q1 ’25, as it says the business is broader with other revenue streams. And yet, investors like advertisers want to know what is the subscriber base by total/regions. Global streaming paid members ($269/sub in Q1, +16% Y/Y) will be removed as well. Debate centers around valuation and what investors are willing to pay for a growth stock as we may be entering the next phase. Reflecting slower growth than the last three years, we lower our target by $10 to $640 using a forward TEV/EBITDA of 27.8x, a 20.6% discount to three-year historical average at 35.0x. We raise our EPS estimates in 2024 to $18.55 ($17.05) and 2025 to $21.95 ($20.60). Our