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After reporting earnings Tuesday, after the market closed Netflix (NFLX - Free Report) is up over 10% on the day.
After cratering over (-75%) from its all-time high in 2022, the streaming giant has mounted an incredible comeback, demonstrating its leadership in the online content industry. Netflix stock has now nearly tripled from its lows and made two-year highs today.
During yesterday's earnings call, Netflix showed continued strength in subscriber and revenue growth, and laid out a long-term plan for adding new content types to its platform.
The stock also enjoys a Zacks Rank #2 (Buy) rating, indicating upward tending earnings revisions and making it a worthy consideration for any investor.
Image Source: Zacks Investment Research
Upbeat Earnings Call
Netflix reported strong Q4 2023 results, with a 12% year-over-year revenue growth, exceeding expectations and ending the year with improved operating margins at 21%, surpassing the 20% target. Free cash flow increased to $6.9 billion for the year. The company sees opportunities in 2024 to enhance member value by improving its core content (series and films) while expanding into games, live, and sports-adjacent programming.
On Tuesday, a deal was announced between Netflix and WWE “Raw” wrestling parent company TKO Group Holdings (TKO - Free Report) , for a massive 10-year $5 billion streaming deal. This shifting content type shows Netflix’s commitment to adding new streams of entertainment.
They also plan to scale their ads business, deepen connections with fans through marketing and consumer products, and introduce innovative live experiences.
In Q4 2023, Netflix achieved 13.1 million paid net additions, totaling 260.8 million paid subscribers, a new record. Revenue in the quarter grew 12%, reflecting benefits from paid sharing, price changes, and a strong content slate. Operating income for Q4 was $1.5 billion, up from $0.5 billion a year ago, with an operating margin of 17%. For the full year 2023, Netflix generated $7 billion of operating income, exceeding expectations, and achieved an operating margin of 21%.
Despite a slightly lower-than-forecasted EPS of $2.11 for Q4, Netflix expressed optimism for 2024, projecting healthy double-digit revenue growth and increasing the full-year operating margin forecast from 22-23% to 24%. The company aims to sustain healthy revenue growth, expand operating margins, and continue growing free cash flow.
Netflix emphasized its commitment to continuous improvement and innovation, investing in content, advertising, and games to stay competitive in the streaming market. The company believes it has ample room for growth, currently representing only about 5% of the $600 billion-plus revenue market across paid TV, film, games, and branded advertising.
Competition
The streaming wars is no joke, and Netflix’s competition for watch-time is fierce. Though, with mammoth companies like Amazon (AMZN - Free Report) , Disney (DIS - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) as rivals I think that Netflix’s continued growth this quarter is extremely impressive.
Since Amazon, Disney, Alphabet and Apple all enjoy the luxury of multiple businesses to balance their streaming services, there may be something to say about being singularly focused like Netflix.
Next Tuesday January 30 we will get earnings from Alphabet, and then on Thursday February 1 we will hear from both Apple and Amazon, so it will be extremely helpful to be able to compare how each is faring.
Bottom Line
I really think that even with the huge share appreciation NFLX has experienced in the last 18 months, the stock is still quite appealing. Not only have they generated fantastic revenue and subscriber growth but expanding margins and profits as well as entirely new venues of entertainment.
Furthermore, Netflix is trading near its cheapest relative valuation in over a decade. The company currently trades at a one year forward earnings multiple of 30.6x, well below its five-year median of 54x and 10-year median of 94x.
Image Source: Zacks Investment Research
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Is Netflix Winning the Streaming Wars?
After reporting earnings Tuesday, after the market closed Netflix (NFLX - Free Report) is up over 10% on the day.
After cratering over (-75%) from its all-time high in 2022, the streaming giant has mounted an incredible comeback, demonstrating its leadership in the online content industry. Netflix stock has now nearly tripled from its lows and made two-year highs today.
During yesterday's earnings call, Netflix showed continued strength in subscriber and revenue growth, and laid out a long-term plan for adding new content types to its platform.
The stock also enjoys a Zacks Rank #2 (Buy) rating, indicating upward tending earnings revisions and making it a worthy consideration for any investor.
Image Source: Zacks Investment Research
Upbeat Earnings Call
Netflix reported strong Q4 2023 results, with a 12% year-over-year revenue growth, exceeding expectations and ending the year with improved operating margins at 21%, surpassing the 20% target. Free cash flow increased to $6.9 billion for the year. The company sees opportunities in 2024 to enhance member value by improving its core content (series and films) while expanding into games, live, and sports-adjacent programming.
On Tuesday, a deal was announced between Netflix and WWE “Raw” wrestling parent company TKO Group Holdings (TKO - Free Report) , for a massive 10-year $5 billion streaming deal. This shifting content type shows Netflix’s commitment to adding new streams of entertainment.
They also plan to scale their ads business, deepen connections with fans through marketing and consumer products, and introduce innovative live experiences.
In Q4 2023, Netflix achieved 13.1 million paid net additions, totaling 260.8 million paid subscribers, a new record. Revenue in the quarter grew 12%, reflecting benefits from paid sharing, price changes, and a strong content slate. Operating income for Q4 was $1.5 billion, up from $0.5 billion a year ago, with an operating margin of 17%. For the full year 2023, Netflix generated $7 billion of operating income, exceeding expectations, and achieved an operating margin of 21%.
Despite a slightly lower-than-forecasted EPS of $2.11 for Q4, Netflix expressed optimism for 2024, projecting healthy double-digit revenue growth and increasing the full-year operating margin forecast from 22-23% to 24%. The company aims to sustain healthy revenue growth, expand operating margins, and continue growing free cash flow.
Netflix emphasized its commitment to continuous improvement and innovation, investing in content, advertising, and games to stay competitive in the streaming market. The company believes it has ample room for growth, currently representing only about 5% of the $600 billion-plus revenue market across paid TV, film, games, and branded advertising.
Competition
The streaming wars is no joke, and Netflix’s competition for watch-time is fierce. Though, with mammoth companies like Amazon (AMZN - Free Report) , Disney (DIS - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) as rivals I think that Netflix’s continued growth this quarter is extremely impressive.
Since Amazon, Disney, Alphabet and Apple all enjoy the luxury of multiple businesses to balance their streaming services, there may be something to say about being singularly focused like Netflix.
Next Tuesday January 30 we will get earnings from Alphabet, and then on Thursday February 1 we will hear from both Apple and Amazon, so it will be extremely helpful to be able to compare how each is faring.
Bottom Line
I really think that even with the huge share appreciation NFLX has experienced in the last 18 months, the stock is still quite appealing. Not only have they generated fantastic revenue and subscriber growth but expanding margins and profits as well as entirely new venues of entertainment.
Furthermore, Netflix is trading near its cheapest relative valuation in over a decade. The company currently trades at a one year forward earnings multiple of 30.6x, well below its five-year median of 54x and 10-year median of 94x.
Image Source: Zacks Investment Research