Netflix is the IBD Stock of the Day for Thursday, as NFLX stock reclaims a previous buy point. Netflix stock jumped early Thursday after the streaming giant's advertising chief touted the growth of its advertising-supported plan.
On the stock market today, Netflix stock climbed 2.9% to close at 492.23. Last year, NFLX stock gained 65%.
The Los Gatos, Calif.-based company has 247 million subscribers across 190 countries for its TV, films and gaming streaming services.
Netflix Stock
With the gains early Thursday, NFLX reclaimed a 482.70 buy point from a cup-with-handle base, according to IBD MarketSmith. Further, the stock hit 503.41 intraday, its best level since January 2021. Shares also rebounded from the 21-day and 10-week lines while breaking a short downtrend.
Netflix Ad-Tier User Boom
Netflix now has more than 23 million monthly active users for its ad-supported subscription tier, the company's advertising president, Amy Reinhard, told Variety. As streaming competition intensifies, Reinhard's comments showed the company's new product is growing quickly. Netflix said in a blog post in November that the ad-supported service had reached 15 million monthly active users.
The company launched the lower-cost option in November 2022, in a bid to reinvigorate subscriber growth that had slowed that year.
Users can pay $6.99 per month for a Netflix plan that includes advertisements, compared with $15.49 per month for its standard plan.
"The thing we're really excited about is the engagement," Reinhard told Variety. She added that 85% of ad-support plan users are streaming for more than two hours per day.
Some Wall Street analysts took notice of the new numbers. Evercore ISI estimated in a client note that 23 million monthly active users would translate to 12 million to 15 million subscriptions. That suggests the ad-supported tier has reached roughly 5% of Netflix's global subscription base, the firm noted.
"Not a significant number yet, but if this growth cadence continues, Netflix may well reach 50 million monthly active users and close to 10% of its subscriptions base by the end of 2024," wrote Evercore ISI analyst Mark Mahaney. "Now we're talking real scale — which could catalyze more significant and permanent ad budget shift to Netflix."
In December, research firm Insider Intelligence estimates that Netflix's advertising revenue will climb from $684 million in 2023 to just over $1 billion in 2024 and $1.1 billion in 2025. Rival Disney+, meanwhile, will grow from $786 million in 2023 to $912 million in 2024, according to Insider Intelligence.
Netflix Earnings Watch
The next test for Netflix stock comes later this month, when the company reports fourth-quarter earnings on Jan. 23. Analysts expect the streaming giant to post earnings of $2.21 per share on sales of $8.7 billion, according to FactSet. In the year-earlier period, Netflix earned 12 cents a share on sales of $7.85 billion.
Analysts are largely positive. Of the 50 analysts following NFLX stock, 58% hold a buy or equivalent rating, according to FactSet.
That percentage had dipped as low as 27% in 2022. That year, Netflix sank 51% amid concerns about slowing subscriber growth.
Netflix Stock: Technical Ratings
Meanwhile, Netflix is the No. 2 stock among the leisure-movies and related group tracked by MarketSmith. IBD Stock Checkup shows Netflix stock has an IBD Composite Rating of 88 out of a best-possible 99. The score combines five separate proprietary ratings into one rating — with the best growth stocks scoring above 90.
However, NFLX has an IBD Relative Strength Rating of 91 out of 99. The Relative Strength Rating shows how a stock's price performance stacks up against all other stocks over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
NFLX stock is trading above its 50-day moving average line. But IBD Stock Checkup shows it has an Accumulation/Distribution Rating of C-, indicating limited interest among institutional investors
Further, Netflix stock is on IBD's SwingTrader list.
Benjamin Pimentel contributed to this report
