Netflix Inc (NASDAQ:NFLX, XETRA:NFC) is set to deliver a pivotal first quarter earnings report after following its decision to abandon a potential acquisition of Warner Bros. Discovery, with Bank of America pointing to a renewed focus on core operations.
“Upcoming Q1 results represent Netflix’s first earnings call following the decision to walk away from the WBD acquisition, and we expect management to address this decision head on,” the bank’s analysts wrote in a note to clients.
The firm described the company’s strategy as reverting to “business as usual,” centered on organic growth, continued investment in content, and scaling its advertising business. They also identified live events, sports, and international markets as likely to be the main drivers of future growth within Netflix’s content strategy.
Meanwhile, the analysts pointed to competing forces affecting the stock. “On one hand, amid an uncertain macro environment, Netflix appears defensive given their sticky subscriber revenue,” the analysts wrote. “On the other, concerns related to engagement trends and AI are currently difficult to disprove.”
Netflix’s recent US price increases were framed as a notable signal. “Netflix announced another round of US price increases, marking the second hike in just over a year and underscoring the company’s growing confidence in its pricing power,” they wrote. “While a price increase was expected, the timing appears earlier than the market anticipated.”
Despite lingering concerns about engagement, Bank of America interpreted the move positively. “Given the overarching concerns regarding engagement over the last 12 to 18 months, we view these increases as a validator of Netflix’s confidence in their underlying strength and durability,” the analysts wrote. “This reinforces our view of management’s ability to drive ARPU growth even at a significantly larger global scale.”
Bank of America reiterated its Buy rating and $125 price objective, implying upside from current levels of about $95.
“In our view, Netflix shares will be fueled by continued positive subscriber and earnings momentum in addition to a long runway for advertising and live opportunities,” the analysts concluded.
“Supported by its world-class brand, leading global subscriber scale, position as an innovator and increased visibility in growth drivers, we believe that Netflix’s shares will perform well.”
Netflix will report its Q1 earnings on April 16 after US markets close.