We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Time to Buy Netflix? Profits Surge on Subscriber Growth
Following an earnings and sales beat, Netflix stock is trading marginally lower. The primary factor dragging the stock down seems to be the weakening stock indexes, because the quarterly earnings report from Netflix was quite exceptional.
Revenue in the quarter grew 17% YoY to $9.37 billion, while operating margins expanded from 22% to 27%. Especially impressive was growth in the ads tier membership, which increased subscribers 34% QoQ. With the expansion into live content, management expects even more opportunities to expand its ad business.
Currently, Netflix enjoys a Zacks Rank #2 (Buy) rating along with a reasonable valuation, leading me to believe that today's selloff offers an opportunity to consider owning the stock. Netflix stock has considerably outperformed the broad market thus far in 2024.
Netflix Dominates the Streaming Market
In the report, the company shared a graphic from Nielsen that demonstrates just how much viewers consume Netflix's streaming service.
From the report: According to Nielsen, streaming accounts for 40% of total TV time in the US today, with Netflix and YouTube the clear leaders in direct-to-consumer entertainment. Collectively our two services account for almost half of all streaming TV watch time in the US.
In H1 2024 (and despite headwinds from paid sharing) Netflix generated more view hours in the Nielsen Top 10 across film, series and licensed titles than all the other streamers combined.
This shows Netflix's clear edge over competitors Amazon, Disney and other streaming competitors. Although Amazon and Disney continue to expand offerings like Netflix, there are none who are quite so impressive at the streaming maverick.
Netflix Boasts a Fair Valuation
As of today, Netflix is trading at a very reasonable valuation considering its dominant role in the streaming industry and impressive growth prospects.
The company is trading at a one year forward earnings multiple of 35.1x, which is well below its five-year median of 40.6x and above the broad market average.
EPS are forecast to grow 25.3% annually over the next three to five years.
Bottom Line
Netflix's impressive earnings report, highlighted by strong revenue and earnings growth, expanded margins and accelerating subscriber additions, underscores its dominant position in the streaming landscape.
While the broader market's weakness has temporarily pushed the stock lower, the company's robust performance and reasonable valuation make it a compelling investment opportunity. The potential for continued growth, driven by factors like ad revenue expansion, live content and other new content offerings, further strengthens Netflix's investment case.
Investors seeking exposure to the thriving streaming sector should seriously consider adding Netflix to their portfolios.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Investment Ideas feature highlights: Netflix Amazon, and Disney
For Immediate Release
Chicago, IL – July 22, 2024 – Today, Zacks Investment Ideas feature highlights Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) and Disney (DIS - Free Report)
Time to Buy Netflix? Profits Surge on Subscriber Growth
Following an earnings and sales beat, Netflix stock is trading marginally lower. The primary factor dragging the stock down seems to be the weakening stock indexes, because the quarterly earnings report from Netflix was quite exceptional.
Revenue in the quarter grew 17% YoY to $9.37 billion, while operating margins expanded from 22% to 27%. Especially impressive was growth in the ads tier membership, which increased subscribers 34% QoQ. With the expansion into live content, management expects even more opportunities to expand its ad business.
Currently, Netflix enjoys a Zacks Rank #2 (Buy) rating along with a reasonable valuation, leading me to believe that today's selloff offers an opportunity to consider owning the stock. Netflix stock has considerably outperformed the broad market thus far in 2024.
Netflix Dominates the Streaming Market
In the report, the company shared a graphic from Nielsen that demonstrates just how much viewers consume Netflix's streaming service.
From the report: According to Nielsen, streaming accounts for 40% of total TV time in the US today, with Netflix and YouTube the clear leaders in direct-to-consumer entertainment. Collectively our two services account for almost half of all streaming TV watch time in the US.
In H1 2024 (and despite headwinds from paid sharing) Netflix generated more view hours in the Nielsen Top 10 across film, series and licensed titles than all the other streamers combined.
This shows Netflix's clear edge over competitors Amazon, Disney and other streaming competitors. Although Amazon and Disney continue to expand offerings like Netflix, there are none who are quite so impressive at the streaming maverick.
Netflix Boasts a Fair Valuation
As of today, Netflix is trading at a very reasonable valuation considering its dominant role in the streaming industry and impressive growth prospects.
The company is trading at a one year forward earnings multiple of 35.1x, which is well below its five-year median of 40.6x and above the broad market average.
EPS are forecast to grow 25.3% annually over the next three to five years.
Bottom Line
Netflix's impressive earnings report, highlighted by strong revenue and earnings growth, expanded margins and accelerating subscriber additions, underscores its dominant position in the streaming landscape.
While the broader market's weakness has temporarily pushed the stock lower, the company's robust performance and reasonable valuation make it a compelling investment opportunity. The potential for continued growth, driven by factors like ad revenue expansion, live content and other new content offerings, further strengthens Netflix's investment case.
Investors seeking exposure to the thriving streaming sector should seriously consider adding Netflix to their portfolios.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.