Netflix Stock Just Quietly Hit a New All-Time High. 5 Reasons It Could Have Further to Climb.
When it comes to streaming video, there's Netflix (NASDAQ: NFLX) -- and then there's everybody else. The company is the undisputed pioneer in internet-delivered television, and it remains the one to beat in many respects. While the streaming wars have largely faded from sight in recent years, Netflix continues to be the dominant player in the space.
Netflix hit a new all-time high this week, surpassing $700 per share and quietly eclipsing its previous watermark set in late 2021. This adds to its already monumental gains. Since its IPO in early 2002, Netflix stock has soared 63,725% as of Wednesday's close.
While Netflix has largely stayed out of the limelight in recent years, there's reason to believe the stock still has further to climb.
Image source: Getty Images.
1. Netflix's advertising business is growing like gangbusters
Earlier this month, Netflix made a splash when the company revealed the results of its "upfronts." This age-old practice brings together television network executives and major advertisers. During these annual meetings, "media companies try to sell the bulk of their commercial inventory -- usually as much as 70% to 80% -- ahead of their next cycles of programming," according to entertainment industry publication Variety.
Netflix walked away from this year's event netting ad sales gains of 150% year over year as its ad-supported plan gathers steam. Advertisers were attracted by some of the company's flagship programming, and its ongoing foray into live events also contributed (more on that in a bit).
2. Plenty of hit shows
What attracted advertisers -- and continues to drive subscription growth -- is Netflix's hit shows, and there's plenty to choose from. Squid Game tops the list of the company's most popular series, as does Wednesday. Other perennial favorites include Stranger Things, Bridgerton, Money Heist, The Crown, and Umbrella Academy.
More recent favorites include Outer Banks, American Murder, Ripley, Baby Reindeer, and Emily in Paris. There are plenty more, but you get the idea.
3. More sports programming
One of the more notable changes in recent memory is Netflix's shifting view of live sports. For a long time, the company stuck to sports documentaries, but its strategy is evolving.
Netflix hosted its own golf tournament and tennis match, dubbed The Netflix Cup and The Netflix Slam, respectively, as it dipped its toe into sports programming. It must have liked what it saw.
Earlier this year, Netflix announced that it would become the exclusive home of WWE's Raw beginning in January 2025. Raw has long been a staple for wrestling fans, viewed by more than 1 billion households worldwide in 25 languages, according to the company. Before its move to Netflix, Raw called Comcast's USA Network home, where it reigned as the channel's biggest draw.
The other big sports headline is that Netflix will give football fans a big Christmas present. On Dec. 25, 2024, the company will broadcast two of the National Football League's (NFL) biggest holiday gridiron clashes: the Super Bowl LVII-winning Kansas City Chiefs versus Pittsburgh Steelers, as well as the Baltimore Ravens versus Houston Texans. The company also noted that it would host at least one game each on Christmas Day 2025 and 2026.
New viewers might come for the football and stay for the other entertainment.
4. Growing subscriber base
The key to Netflix's success has always been -- and will always be -- its ability to attract subscribers, either to the company's full-priced tier or its cheaper ad-support tier. Despite robust competition over the past few years from the likes of Amazon Prime Video, Walt Disney's Disney+, Hulu, and Warner Bros. Discovery, among others, Netflix remains the king of streaming video.
In the second quarter, Netflix grew its streaming paid memberships to 278 million, up 17% year over year. In fact, its year-over-year subscriber growth has accelerated for six consecutive quarters after bottoming out in late 2022. The acceleration is largely thanks to the addition of its ad-supported tier in late 2022 and its password crackdown in early 2023. Netflix announced earlier this year that its ad-supported tier had surpassed 40 million members, helping fuel its aforementioned success in the advertising market.
The company's accelerating growth suggests Netflix has what viewers want.
5. Growing revenue and greater profits
Netflix's ability to attract subscribers and the company's pricing power have propelled the company's revenue and profits to greater heights.
Despite the economic headwinds last year, Netflix grew revenue by 7% in 2023, while its earnings per share (EPS) climbed 21%. This year is off to an even better start, as revenue and EPS jumped 16% and 65%, respectively, during the first six months of 2024.
This helps to illustrate the beauty of Netflix's operating model, as each new subscriber drops more profits to the bottom line.
I'm not the only one who thinks so
I'm a longtime Netflix bull who believes the world is the company's streaming oyster -- but don't take my word for it. Wall Street is equally bullish regarding the streaming pioneers' future potential. Of the 46 analysts who offered an opinion in July, 29 rated the stock a buy or strong buy, and none recommended selling.
Pivotal Research analyst Jeff Wlodarczak is among the company's biggest fans, with a buy rating and $800 price target on the stock. This represents additional upside of 16% compared to Thursday's closing price.
In a report titled "This is What Winning Looks Like," the analyst opines that it is "abundantly clear that Netflix is demonstrating massive scale as it continues to produce strong subscriber results and free cash flow with the ability to invest to accelerate that growth." The analyst goes on to say Netflix "has clearly won the global streaming wars."
Given the company's decided advantages, industry dominance, and financial performance, it's pretty clear Netflix stock is a buy.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Amazon, Netflix, and Walt Disney. The Motley Fool has positions in and recommends Amazon, Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
