Netflix (NASDAQ: $NFLX) is a leading streaming service with operations in over 190 countries worldwide. The company’s stock soared over 12% during the early morning trading session on Wednesday after it reported a massive jump in subscriber numbers in the fourth quarter fiscal 2024 results.
Netflix Records Massive Subscriber Growth
In the fourth quarter, Netflix reported a net subscriber growth of 19 million, the largest in its history, compared to a 13 million increase in the fourth quarter of fiscal 2023, and 5 million in the previous quarter. The company now has 301.63 million subscribers, beating estimates of 290.9 million.
Q4 Fiscal 2024 Revenue And Earnings Beat Estimates
The company reported revenue of $10.25 billion in the fourth quarter, a 16% year over year increase, and above estimates of $10.11 billion. Net income for the quarter came in at $1.87 billion compared to $938 million in Q423, for a diluted EPS of $4.27, beating estimates of $4.20 per share.
Cash Flow And Balance Sheet Figures
Netflix announced that it bought back 9.9 million shares for $6.2 billion in fiscal 2024. Under the existing share buyback program, Netflix has used $12.9 billion. It announced that the board had approved a $15 billion increase to the buyback program, bringing it to $17.1 billion.
It ended the quarter with $1.38 billion in free cash flow, compared to $1.58 billion in Q23. For the full year, the company reported $7.4 billion in net cash from operating activities compared to $7.3 billion in fiscal 2023. Its full-year free cash flow was $6.9B, similar to the fiscal 2023 figure, while its full-year total debt was reported at $15.7 billion.
Forecasts
For the first quarter of fiscal 2025, Netflix expects a diluted EPS of $5.58, and revenue of $10.42 billion. The project is below analysts’ expectations of a diluted EPS of $5.97, and revenue of $10.49 billion.
Netflix expects full-year fiscal 2025 revenue of $43.5-$44.5B, a $0.5B increase from the previous forecast. At the midpoint of $44 billion, Netflix beat estimates of $43.6 billion.
The company is now expecting a 29% operating margin for 2025, up from the previous forecast of 28%, and a two-point increase from the 27% operating margin in fiscal 2024.
Netflix Raises Prices
Following the massive surge in subscriber numbers, Netflix announced that for its base service with ads, it would now cost $7.99 in the US and $17.99 CAD in Canada. Previously, the lowest tier cost $6.99 for US subscribers.
During the earnings call, Co-CEO Gregory K. Peters stated that the company still had massive room for growth. He pointed out that they were only exploiting 6% of the revenue opportunity in countries where they had a presence. According to him, they believe that they can grow that share progressively each year.
Netflix Stock Performance
After closing 1.35% high on Tuesday, January 21, 2025, at $869.68 per share, NFLX’s share rose 12.58% during early morning trading to $979.05 as of 9:41 AM EST on Wednesday, January 22, 2025.
The stock has outperformed the market, rising 80.08% in the past 12 months, compared to the 24.99% gain of the S&P 500 in the same period. It has also beaten its competitor, Disney (DIS), in the same period, which is only up 16.81%.
Analysts give NFLX stock a moderate buy rating, with the highest price target at $1,250, while the lowest is $715. On average, analysts forecast a price of $986.4r, which will undoubtedly be revised upwards following the earnings beat in Q4.
Should You Add Netflix To Your Portfolio in 2025?
Netflix’s impressive Q4 results, highlighted by historic quarterly subscriber growth, make a strong case for investors to consider this stock. However, it is worth noting that NFLX stock is quite expensive, with a forward price-to-earnings ratio of 36.50 compared to 20.16 for Disney (DIS) stock.
Nevertheless, the company has identified a massive opportunity for growth, with the CEO stating that they have only exploited 6% of their potential market. Consequently, adding Netflix to your portfolio could potentially have a positive impact in the medium term.
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