A leading analyst sizes up streaming stock Netflix Inc NFLX ahead of the company's fourth quarter earnings report, set for January 2024. The report comes after the company reported 247 million subscribers at the end of the third quarter.
The Netflix Analyst: Wedbush analyst Alicia Reese has an Outperform rating on Netflix and a price target of $525.
Related Link: Netflix Lands More Live Sports: How Success Of Docuseries Helped Pave The Way
The Analyst Takeaways: A survey conducted by Wedbush shows an uptick in subscribers and average revenue per user. The stock is one of the companies on Wedbush's Best Ideas List thanks to its strong cash flow.
"We think Netflix has reached the right formula with global content creation, balancing costs and increasing profitability, while its password sharing crackdown and eventually its ad-supported tier should further boost cash generation," Reese said.
The analyst said Netflix should be valued according to its profitability, which comes as competitors are working on new strategies to compete with the market leader.
"Although ads are not yet directly accretive, the ad-tier should continue to reduce churn and draw new subscribers to the service."
The analyst sees growth coming for subscriber numbers and average revenue per user in the coming quarters, which could drive free cash flow expansion.
Key findings from the Wedbush survey highlighted an increase in subscribers, expansion of the ad-supported tier, and the crackdown on password sharing contributing to the addition of new members to various plans.
"Ultimately, as Netflix continues to add ad-tier subscribers, and as it increases its ad-delivery rates, its ad-tier will also drive ARPU higher while continuing the limit churn."
Reese sees Netflix hitting fourth quarter revenue of $8.758 billion, which is ahead of consensus estimates from analysts and guidance from the company. The analyst expects Netflix to add 8.75 million global net paid subscribers in the fourth quarter, also ahead of Street consensus estimates.
NFLX Price Action: Netflix shares trade at $490.49 versus a 52-week trading range of $273.41 to $500.89. Shares of the streaming company are up 66% year-to-date in 2023.
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