Netflix's Earnings Are Expected to Be Better Than Expected, According to Analysts

Netflix is set to release its third-quarter results next week, and many analysts are optimistic about further gains for the stock. The company’s quarterly report is scheduled for release next Thursday, following the close of trading. So far, Netflix has had a stellar performance in 2024, with its stock climbing by nearly 50%.

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UBS analyst John Hodulik is one of those who see the potential for continued growth. In a note to clients on Wednesday, he stated that Netflix stands out as a major beneficiary of industry changes and anticipates strong results for the third quarter. Although subscriber growth is expected to slow compared to last year, it should remain steady. Hodulik, who has a buy rating on the stock, set a price target of $750, which suggests a modest upside of over 2% from Thursday’s closing price.

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Hodulik further emphasized that Netflix’s fourth-quarter outlook is likely to show strong subscriber growth, particularly driven by popular releases such as Squid Game 2 and the streaming of two NFL games. He expects net subscriber additions for the quarter to be around 7.1 million, an improvement from previous projections of 5.8 million. The analyst also predicts a total of 13.1 million new subscribers by the end of the year. Additionally, he projects Netflix’s free cash flow will increase by $2.9 billion between 2024 and 2025, signaling healthy financial growth.

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Hodulik’s bullish forecast of double-digit growth for Netflix comes on the back of the company exceeding expectations in its previous two quarterly reports this year. Netflix saw its ad-supported membership base increase by 34% in the second quarter, while total memberships grew by 16% in the first quarter.

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Other analysts share an even more optimistic outlook for Netflix ahead of its earnings release. Both Morgan Stanley and Oppenheimer have recently raised their price targets for the media giant. Morgan Stanley set its target at $820, while Oppenheimer raised its target to $775. These updated targets suggest potential upside gains of over 12% and 6%, respectively.

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Benjamin Swinburne, a Morgan Stanley analyst, maintained his overweight rating on Netflix and pointed to a significant potential for revenue growth. He anticipates the company’s revenue to grow by at least 13% in 2025, reflecting the long-term prospects for the streaming service.

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Oppenheimer analyst Jed Kelly and his team also hold a positive view on Netflix’s third-quarter performance, with an outperform rating on the stock. Kelly expects Netflix to deliver strong results and even predicts that the company will increase prices for its standard subscription plan by 8% to 15%. He also expects a price hike for its premium plan in markets outside the U.S., U.K., and France.

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Kelly emphasized Netflix’s continued dominance in the streaming space, highlighting the company’s ability to produce highly engaging content and monetize it more effectively than its competitors. “We believe Netflix’s dominance will continue,” Kelly wrote in a note to clients this week, reinforcing the belief that Netflix remains ahead of its peers in terms of content production and monetization.

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In comparison to other analysts, the broader Wall Street sentiment on Netflix remains positive. According to LSEG data, 33 out of 48 analysts covering the stock have a strong buy or buy rating. However, 13 analysts have taken a more neutral stance. As of Thursday’s close, Netflix has an average price target of $708.75, implying a potential downside of about 3%.

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Despite this mixed outlook, the overall consensus suggests that Netflix is well-positioned for growth. The company’s ability to navigate industry shifts, its strong content lineup, and its capacity to increase cash flow are seen as key factors driving future success. Analysts remain optimistic about the company’s ability to continue attracting new subscribers and enhancing revenue, particularly as it rolls out more engaging content and explores new pricing strategies.

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The upcoming earnings report will likely be a pivotal moment for Netflix, with investors and analysts closely watching to see if the company can maintain its momentum. With popular content like Squid Game 2 and NFL programming expected to boost subscriber numbers, Netflix seems poised for another strong quarter. The company's strategic moves, including potential price increases and a growing ad-supported membership base, further signal a promising future for the streaming giant.

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Overall, Netflix’s third-quarter results and outlook for the rest of the year are expected to reinforce its standing as a dominant player in the streaming industry. While some analysts have tempered their expectations, the majority remain bullish, anticipating strong financial performance and continued subscriber growth well into 2025.

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