6 Netflix Analysts Size Up Earnings, Subscribers, WWE Deal: 'WWE Raw Changes The Game'

Streaming giant Netflix Inc NFLX reported fourth-quarter financial results after the market close Tuesday.

Here's a look at what analysts are saying about the report after Netflix beat revenue estimates, missed earnings per share estimates and ended the year with 260.28 million global paid members.

The Netflix Analysts: Macquarie analyst Tim Nollen upgraded shares from Neutral to Outperform and raised the price target from $410 to $595.

Baird analyst Vikram Kesavabhotla has an Outperform rating and raised the price target from $500 to $600.

Piper Sandler analyst Matt Farrell has a Neutral rating and $550 price target.

William Blair analyst Ralph Shackart has an Outperform rating and no price target.

KeyBanc analyst Justin Patterson has an Overweight rating and raised the price target from $545 to $580.

Needham analyst Laura Martin has a Hold rating and no price target.

Related Link: Netflix’s Co-CEO Says ‘Thrilled’ With Password-Sharing Crackdown, Sees Positive Impact On Engagement

Macquarie On Netflix: There was a lot to like in Netflix's fourth-quarter results, Nollen said.

"Netflix delivered excellent Q4 results and outlook as its efforts to boost subs, revenue and earnings are bearing fruit," the analyst said.

The analyst said Netflix's deal with TKO Group Holding TKO unit WWE announced Tuesday can help grow its audience and advertising revenue.

"WWE Raw changes the game. The 10-year global deal signed today, starting in '25, can bring a large and engaged year-round audience and can jump-start Netflix's ad sales effort with large-event live content,” he said.

"We had been waiting for confirmation that Netflix's moves were paying off. We have that now."

The analyst said the upside potential for Netflix with its ad-supported plan is now present.

Baird On Netflix: The streaming giant provided an encouraging fourth-quarter update, Kesavabhotla said.

"NFLX reported 4Q23 results and offered forward comments that were generally encouraging across the board," Kesavabhotla said.

The analyst said Netflix is executing well on its near-term and long-term initiatives.

"There are a variety of factors that should keep the shares interesting from here – including some additional tailwinds from paid sharing, further scaling of the advertising business, adjustments to pricing and plan offerings, and continued improvement on the content side."

The analyst called the WWE partnership and live programming efforts a "compelling opportunity to further increase engagement.

"Overall, NFLX is demonstrating the benefits of its unique position in the media/entertainment landscape and we expect positive execution to continue supporting momentum in the shares."

Piper Sandler On Netflix: The fourth quarter was solid for Netflix, according to Farrell.

"In addition to the earnings announcement, Netflix announced a partnership with WWE, allowing Netflix to stream Raw live on the platform starting in January 2025," Farrell said.

"We think the deal represents a sweet spot within the sports landscape, allowing the company to follow a similar playbook to its other sports offerings."

The analyst said the company's ad tier is still in investment mode, without major revenue contribution until at least 2025.

"Management continues to prioritize scale within the ad-tier, largely by making it a more attractive offering for consumers."

William Blair On Netflix:  The streaming giant achieved its paid net adds and its ad-supported plan is scaling, Shackart said.

"Beyond consumer adoption, the company is continuing to improve the measurement and targeting capabilities of its offerings for advertisers," the analyst said.

The analyst said Netflix has a total addressable market of 500 million connected TV households globally, excluding China and Russia.

"In our view the paid sharing initiative had been a positive tailwind for Netflix, despite investor concerns around churn at the time the initiative was first announced and launched."

Netflix has only "modestly" penetrated a $600-billion revenue opportunity that includes television, film, games and branded advertising, Shackart said.

"While we believe the ad-supported platform is still in need of additional refinement, we remain optimistic that both this newer tier and paid sharing will provide tailwinds to the top line through the medium term. Overall, Netflix continues to be well positioned to remain a secular streaming winner.”

KeyBanc On Netflix: Net add tailwinds could moderate in the coming quarter, Patterson said.

"We believe Netflix is poised for more balanced growth between subscribers and monetization over the medium term," the analyst said.

Paid sharing and the ad-supported tier have helped put in place a plan for low double-digit revenue growth and 25% annual earnings per share growth, he said.

Needham On Netflix: Netflix’s fourth-quarter report was "strong," Martin said, but said she prefers advertising businesses for 2024, leading to a reiteration of a Hold rating on Netflix.

Martin sees the WWE deal as a win, particularly with Netflix's deal terms.

"At NFLX's option, it can cancel the deal after 5 years, or renew it at pre-negotiated terms for an addition 5 years," Martin said.

"This option is valuable for NFLX shareholders because it protect downside (in case WWE content stops working) but retains 100% of the potential upside value of WWE content."

The analyst cautions that the WWE deal will bring higher costs for Netflix as it competes for sports rights with other streaming competitors.

"We believe NFLX must buy these types of programming. This implies that content spending will be higher, and FCF lower, than consensus estimates."

NFLX Price Action: Netflix shares are up 13% to $556.85 on Wednesday, hitting new 52-week highs.

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