Few companies had a better 2024 than Netflix. The streaming giant’s stock nearly doubled last year as investors swooned at impressive viewer growth and margins that remain the envy of a notoriously competitive industry. Still, investors will look for assurance from the C-suite that the momentum can carry over into this year when the company reports fourth-quarter earnings after the bell on Tuesday.
High expectations are already baked into the stock price, with the company trading at 37 times earnings over the next 12 months, according to S&P Cap IQ estimates, compared to a multiple of 24 for the S&P 500. That number for Netflix also sits above several of its Silicon Valley neighbors, including the likes Alphabet, Microsoft, Apple, and even AI darling Nvidia.
“Next week is going to be important to affirm those good feelings for us,” said Brian Mulberry, a client portfolio manager at Zacks Investment Management, which owns Netflix in several of its funds.
In October, the stock jumped 11% after the company’s earnings per share for Q3 came in at $5.40, beating Wall Street’s expectations by 30 cents. The platform looked to close the year on a high with the return of its hit series "Squid Game" and broadcasts of two NFL games on Christmas Day that underlined the company’s growing foray into live sports. However, the fourth quarter is typically a weaker one for Netflix, Mulberry said, as viewers decide whether to renew their subscriptions in the new year and the company invests more heavily in new ideas and programming.
This time around, analysts surveyed by Visible Alpha see EPS coming in at $4.23, still doubling from the same quarter last year, while revenue is expected to surge by almost 15% year-over-year to $10.1 billion. The stock could move Tuesday, Mulberry said, depending on whether management reaffirms or ups its forecast for 2025. The company released confident guidance in October, projecting revenue to grow 11-13% to $43-$44 billion this year.
Does Netflix stock have room to grow?
After the stock price increased 90% in 2024, far outpacing the S&P 500’s already impressive 24% gain, Netflix shares have pulled back about 3% to start the year and currently trade around the $860 mark. Analysts have a median price target of $888 on the stock, per Cap IQ, implying much less upside in the year ahead.
“It's not going to be the parabolic share price increase that we've seen over the last 12 to 24 months,” Mulberry said. “Things are getting more competitive. Investors like us are going to want to see return on investments.”
That includes in live sports, where the contracts are eye-wateringly expensive. Netflix paid $150 million to broadcast the two Christmas NFL games this year, according to The Athletic, roughly $50 million more than it cost to produce a season of "Game of Thrones."
The company also paid big money to air the boxing match between former superstar Mike Tyson and influencer Jake Paul in November, but the stream was marred by major buffering and freezing issues. The NFL games went smoother, but Mulberry said it will be important for Netflix to execute going forward.
This past quarter also marks the final time Netflix says it will report subscriber growth numbers. The statistic has been heavily scrutinized by analysts over the years, but the company believes it detracts from other measures it feels are more indicative of customer satisfaction and overall performance.
Mulberry, meanwhile, isn’t too bothered. Other types of sales estimates, he said, can be used to glean the same insight.
