Analysts at Wedbush have repeated their ‘Outperform’ rating for Netflix Inc (NASDAQ:NFLX, ETR:NFC) ahead of the streaming platform’s fourth quarter earnings due today after markets close.
They expect Netflix to report earnings per share (EPS) of $4.31 above the company’s guidance of $4.23 and the Wall Street consensus of $4.20.
Revenue is seen at $10.154 billion, ahead of both guidance of $10.128 billion and the consensus estimate of $10.122 billion.
Based on a survey carried out by the analysts in the US market, Netflix’s ad tier membership continues to expand but overall subscriber growth slowed in the fourth quarter.
They expect Netflix to report net subscriber additions of 1.25 million for the United States and Canada below their prior estimate of 2 million.
Globally, Wedbush expects 10 million net subscriber additions, above the consensus of 9.2 million, noting positive content trends in the Latin America and Asia-Pacific regions.
Looking to Q1 2025, the analysts expect premium tier churn will increase but ad tier shifting to premium and the return of lapsed subscribers should largely offset this.
“Lapsed subscribers who plan to return will more likely opt for the ad tier, similar to recent quarters, but the mix is shifting back toward premium,” they noted.
The analysts have a $950 price target on Netflix. Share of Netflix traded up 0.9% at $865 late morning on Tuesday.
“We think Netflix can meet expectations for EPS to more than double between 2023 and 2026, supporting its premium valuation,” they wrote.
They expect Netflix’s ad-supported tier to become the primary revenue growth driver by 2026.
“So far, the introduction of the ad tier has limited churn, lowering pressure on adding new subscribers, with at least 30 million accounts converting to the ad tier in the past six months,” they wrote.
“We think Netflix is positioned to accelerate ad tier revenue contribution for the next several years as it adds more live events, improves its advertising solutions and targeting, and utilizes new partnerships. With global content creation, balancing costs, and increasing profitability, Netflix has reached the right formula.”
- Updated with share price movement -