Netflix's third-quarter results are in, as are Wall Street's first verdicts on what they mean for the streaming giant and its stock. Most experts went into the earnings report with a bullish mindset, despite some warnings that the company's rising market value may require some patience before shares rise further.
Led by co-CEOs Ted Sarandos and Greg Peters and executive chairman Reed Hastings, Netflix ended September with 282.72 million subscribers worldwide. As expected, quarterly net additions of 5.07 million were lower than the same period a year earlier, when 8.76 million were added.
Including original content launched on the streamer in the third quarter Emily in Paris season 4, The perfect couple, Beverly Hills Cop: Axel F, A good girl's guide to murderand the fourth and final season of The Umbrella Academy.
And for the current fourth quarter, management touted last Thursday: “We are excited to finish the year strong with a great fourth quarter program, including Squid game season 2, the Jake Paul vs. Mike Tyson fight, and two NFL games on Christmas Day.” This led Netflix to predict that paid net additions will be higher in the fourth quarter than in the third quarter.
All of this has led various analysts to maintain their ratings and many to further raise their stock price targets on the streamer. Netflix shares exploded in premarket trading Friday, jumping more than 6% to above $730. But again, there have also been some warnings that the stock may not be able to continue flying high.
For example, T. D. Cowen analyst John Blackledge reiterated its “buy” rating on Netflix shares. After recently raising his price target from $45 to $820, he raised it further following the earnings update $835. “We raised our secondary forecasts after the pace of the third quarter, while changing our estimates for revenue, operating income and earnings per share in '24 and longer term,” he explained.
Marco Mahaneyanalyst at Evercore ISIalso reiterated its post-earnings stock rating, in its case to “outperform,” and raised its price target, in this case by $25 to $775 “on the heels of strong, upbeat third-quarter earnings results.”
He also highlighted “important upsides,” such as “a record operating margin (30%) that appears reasonably sustainable,” an outlook for the fourth quarter that “implies robust upside to Street secondary estimates – thanks to a list of content extremely solid. ” and the disclosure of “several select price increases, with more on the way, we believe.
BMO Capital Markets' Brian Pitz is another analyst who raised his price target on Netflix stock on Friday, raising it by $55 from $770 to $825. It also reiterated its “outperform” rating in a report titled “Strong Execution as Ad Monetization Thesis Remains Intact.”
Pitz highlighted several positives, including “a better-than-expected 2025 revenue growth forecast of 11-13% (vs. BMO's 11.9%)” and his “increased confidence in a ad revenue mix of 10% in 2026,” along with what he called “best in class co-CEO.” The analyst also argued that Netflix's estimated content spending of $18 billion in 2025 “is expected to integrate incremental users/limit churn.” And Pitz concluded: “Netflix remains the primary beneficiary of the $150 billion in linear advertising poised to move online (we estimate $20 billion over the next three years).”
Guggenheim analyst Michael Morris remains optimistic even after raising its 12-month stock price target from $735 to $810 before the latest earnings update. Following the report, he maintained his “buy” rating on Friday, highlighting a key driver of his optimism in the title of his note: “Expanding content slate to fuel further growth.”
William Blair analyst Ralph Schackart it similarly stuck to its “outperform” rating on Netflix without a price target on Friday. “Better-than-expected profitability pushes up full-year margin expectations,” he noted in the title of his report. “Margin expansion continues into 2025.”
His overall conclusion: “We remain optimistic that both of these are newer [ad] paid tier and sharing will provide benefits to [revenue] through the medium term. Overall, Netflix continues to be well positioned to remain a secular streaming winner.” He further argued that expected subscription price increases will “eventually flow through the model to satisfy investors.”
Fundamental Research Group analyst Jeff Wlodarczak continues to be the biggest Netflix bull on the street, further raising his financial estimates on Friday and his stock price target to a high of $900 to $925 and reiterating its “buy” rating. “This is what winning means,” read the headline of his report.
“Netflix reported yet another strong quarterly result with moderately better-than-expected third-quarter subscriber growth, higher-than-expected third-quarter revenue growth…, much better-than-expected third-quarter free cash flow, and an increase in '24 revenue, operating margin and free cash flow guidance,” the analyst noted. “Additionally, management issued strong revenue and operating income growth forecasts for '25 that were right on track with our and consensus expectations, although we believe the operating income growth forecast will likely prove conservative.”
Wlodarczak concluded: “We continue to expect Netflix to be able to generate solid subscriber and ARPU growth (price increases and continued advertising growth partially offset by lower ARPU in developing markets) which should drive solid revenue growth with continually expanding margins, a powerful combination.”
Laurent Yoonanalyst at Bernsteinremains more cautious than others with a “market-perform” rating, but raised his stock price target by $155 to $780. “Smooth sailing from here?” he asked in the headline of his report on Friday.
“There were some concerns about Q3 net sub-adds versus a weaker content slate and slowing paid sharing efforts,” he noted. “User growth was indeed disappointing, especially due to Latin America, but the worst fears are now behind us and the forward-looking comments have been encouraging.”
Yoon concluded by summing up his current view of Netflix stock this way: “The most common question we received about Netflix was whether its valuation is 'expensive.' Considering the updated guidance and confidence around 25 and the implied numbers of 26, we see further upside potential.” And he underlined: “We cannot think of a realistic case of bearishness in the short term, and our sentiment remains the same. Happy streaming.”
On the contrary, Benchmark analyst Matthew Harrigan remains a big bear on Netflix, sticking to its “sell” rating, even as it raises its stock price target by $10 to $555. “The undeniable excellence of streaming is overpriced in the momentum market, especially as the benefits of paid sharing accrue,” he summarized his thesis in the title of his report.
“In the medium term, although probably not in the short term, member growth risks relative to our forecasts may tilt to the downside,” he warned. “The benchmark assessment and underlying forecasts recognize significant growth while recognizing growing competition in video streaming and an increasingly significant shift in consumer activity to different media (TikTok, AR, short-form YouTube videos, etc.) from long-form video content, even as Netflix itself adapts to this environment as well.”
Moffett Nathanson analyst Robert Pesceman has squared opposing positions on where Netflix and its stock are right now. “It was an unquestionable rat race for the company that famously sent Blockbuster to its grave,” he wrote. “He did this despite a slate of impactful strike content.” And it did so by increasing its profit margins.
“However, as much of the subscriber growth appears to represent improved monetization of an existing user base, we question whether the momentum can continue into next year,” he cautioned.
Yes, there is still the growth lever of the company's advertising business still developing. “The other lever at the company's disposal is price, but while the company likely still has room to grow, stalling total time viewed per subscriber may also mean stalling growth in customer-determining power. prices,” Fishman noted. “The company said it sees time per 'member among owners' households' (excluding users who previously shared the password) as increasing year over year, but it's difficult to say to what extent the engagement of those who use password shareholders are factored into the paying subscriber value equation.”
What does all this mean? “With an estimated 4% cash flow yield in 2026, Netflix shares are extremely expensive for a company whose guidance implies revenue deceleration in 2025 (slowing growth to 11-13% from 15% in this year),” Fishman pointed out. “The company trades at a higher price-to-free cash flow multiple (27.9x) than many other big names in tech, including some with faster growth.” One of its charts showed Meta at 24.9x, Amazon at 20.5x, and Snap at 19.9x, for example.
Netflix's latest results have also once again sparked interest beyond traditional Wall Street analysts. “We estimate that Netflix now accounts for nearly 10% of total spending on video services in the United States,” he wrote Madison and Wall principal Brian Wieser in a note. “This compares to approximately 8% of total time spent watching content, indicating the relatively higher value consumers place on Netflix compared to alternatives.”
It also highlighted additional advertising trends. “During the latest quarter, 50% of signups across advertising marketplaces chose the advertising plan, representing an acceleration from the most recently disclosed figure of 40% in each of Q1 2024 and Q4 2023,” he said. wrote the expert. . “As for the number of households subscribing via the ad-supported tier, our analysis of Antenna data suggests that 12% of US subscribers – about 7% of US television households – have this plan, about double last year's level. To the extent that's correct, the growth in ad-supported members represents nearly all of the service's growth in the U.S. since the tier launched nearly two years ago.”