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What Happened?
Shares of streaming video giant Netflix (NASDAQ: NFLX) jumped 15.4% in the pre-market session after the company reported impressive fourth-quarter results, which blew past analysts' global streaming paid memberships expectations, with a strong net add figure (18.9 million vs. estimates of 9.8 million). This led to a revenue and EPS beat in the quarter. Additionally, revenue guidance for 2025 beat expectations, and the company spoke optimistically about multiple vectors such as ad revenue, live events, and new content. Netflix's decision to increase pricing on certain subscription plans also reflects management's confidence in its content's quality and suggests potential benefits for both sales and profitability. Overall, this quarter was strong.
Following the strong performance, Barclays upgraded the stock's rating from Sell to Hold, adding, "The company's continued outperformance largely disproves our hypothesis on growth mean reversion and while growth will slow in '25, current operating momentum if sustained, could drive further upside."
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What The Market Is Telling Us
Netflix’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. Moves this big are rare for Netflix and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 11% on the news that the company reported a "beat-and-raise" with revenue and EPS exceeding Wall Street's projections on solid growth in paying users. Specifically, its closely-watched advertising membership tier grew users by 35% quarter on quarter. Looking at guidance, Netflix lifted its full-year operating margin forecast to 27% (from 26%) while sharing a revenue outlook for the next quarter that came in higher than Wall Street's estimates. The top line is expected to continue to benefit from improved pricing and healthy new paid memberships. Zooming out, we think this was a great quarter.
Netflix is up 9% since the beginning of the year, and at $966.40 per share, has set a new 52-week high. Investors who bought $1,000 worth of Netflix’s shares 5 years ago would now be looking at an investment worth $2,964.
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