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Key Takeaways

• Netflix reported earnings of $4.27 per share, which beat the Zacks Consensus Estimate by 1.67%.

• Netflix anticipates first-quarter 2025 total revenues of $10.4 billion, growth of 11.2% year over year.

• Netflix had 301.6 million paid subscribers across more than 190 countries, up 15.9% year over year.

Global streaming giant Netflix Inc. NFLX reported excellent financial numbers for fourth-quarter 2024. The company reported earnings of $4.27 per share, which beat the Zacks Consensus Estimate by 1.67%. The bottom line jumped 102.4% from the year-ago quarter. Revenues of $10.24 billion increased 16% year over year and beat the consensus mark by 1.29%.

NFLX has maintained healthy engagement levels in the fourth quarter, with about two hours of viewing per member per day, indicating strong member retention. The company added 18.91 million subscribers (the biggest quarter of net adds in the company’s history) compared with 13.12 million net new subscribers in the year-ago period.

The average revenue per membership was up 1% year over year and 3% on foreign-exchange neutral basis in the reported quarter. At the end of the quarter, Netflix had 301.63 million paid subscribers across more than 190 countries, up 15.9% year over year. With this gigantic subscriber base, NFLX is likely to stay ahead of its closest rival The Walt Disney Co. DIS.

Strong Guidance by Netflix

Netflix anticipates first-quarter 2025 total revenues of $10.416 billion, suggesting growth of 11.2% year over year. Management projected earnings of $5.58 per share for the ensuing quarter. For 2025, the company forecast revenues in the range of $43.5-$44.5 billion. NFLX is targeting a 2025 operating margin of 29%, up from the previous forecast of 28% and two points higher than the 27% operating margin in 2024.

Solid Estimate Revisions for NFLX Stock

For first-quarter 2024, the Zacks Consensus Estimate currently shows revenues of $10.5 billion, suggesting an improvement of 12.1% year over year and earnings per share of $5.98, indicating an increase of 13.3% year over year. The company pulled off positive earnings surprises in the last four reported quarters delivering an average beat of 7.2%. 

Moreover, Netflix has witnessed positive earnings estimate revisions for 2025 in the last seven days. At present, the Zacks Consensus Estimate indicates a year-over-year increase of 13.4% and 18.2%, respectively, for revenues and EPS in 2025. The current Zacks Consensus Estimate for 2026 revenues and EPS reflects an upside of 11.1% and 19.5%, respectively.

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Impressive Valuation of NFLX Shares

Netflix has a long-term (3-5 years) growth rate of 26.2%, well above Wall Street’s benchmark — the S&P 500 Index — growth rate of 12.3%. The company has a return on equity (ROE) of 39.5% compared with the S&P 500’s ROE of 30.2%. NFLX has a current net margin of 22.34% compared with the S&P 500’s net margin of 12.6%.

Investment Thesis

Netflix currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. On Jan 22, the stock price touched its all-time high of $999. Moreover, the stock price soared 96% in the past year. The brokerage target price is currently in the range of $650 to $1,100. This indicates a maximum upside of 15.3% and a downside of 32%.

However, given that earnings estimate revisions are likely to trend higher in the coming weeks, many analysts are expected to raise their price target. This will make Netflix’s risk/reward more favorable.

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At this stage, it will be prudent to buy this stock on every dip. Take a systematic investment plan for this stock in order to do cost average. Hold this stock for the long term as the company’s strong execution of the last few quarters and robust future projections will generate more value. Consequently, the stock price should witness an attractive upside.

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