Netflix Has A Plan to Boost Earnings and Share Value

Nearly four dozen analysts have given Netflix (NASDAQ: NFLX) a HOLD rating for the current period with an average price target of $267.69; the median between a high price target of $636 and a low price target of $150 on volume of 13.51 million.

This may seem innocuous but Netflix has struggled for most of the last 12 months. Recent complications have dragged Netflix stock value down to a near all-time, but persistent activity suggests they may be poised to rebound.

A Closer Look at the Numbers

First of all, Netflix's yearly estimates show a steady increase in share value. For example, in 2021, Netflix had an equivalent stock value of $10.72 before the IPO. By the next year (and after the IPO), the average price was $10.83 with a high of 12.23 and a low of 10

For 2023, the average continues to rise to $11.77 with a high of $14.85 and a low of $10.21. Sure enough, trajectory for before the 2024 appears along the same lines, with an average of $14.12, a high of $17.05 and a low of $11.91.

Quarterly estimates paint an even better picture, as Netflix has been beating EPS estimates for the past year. While Netflix failed to meet the $3.18 estimate in Q2 2021, they quickly bounced back to beat the Q3 2021 estimate of $2.57 by at least 60 points. This trend is consistent in Q4 2021 and Q1 2022, beating the estimate by 50 and 63 points, respectively.

The Great Netflix Exodus of 2022

In April of 2022, Netflix suffered major subscriber losses for the first time in the better part of the last ten years. While 1 percent of a subscriber-base that is 222 million strong might not seem like much but Netflix's model is not exactly designed to compensate any kind of subscriber loss, no matter how big or small it might seem. The mass exodus, of course, came after years of escalating issues from membership price hikes to frustration with content, and even their announcement to crack down on shared accounts.

The cancellation of these accounts sank Netflix shares, whose value dropped nearly 50 percent in a matter of days. At one point, Netflix was down more than 70 percent on the year, at the time. As a matter of fact, outlook for Netflix was so uncertain that even the growth investors who normally strike dips like this actually shied away.

But amidst these frustrations and the confusion over its future Netflix shares still performed well. For one, revenue held right along with analyst projections. More importantly, perhaps, EPS for April 2022 came in at $3.53, notably surpassing some analyst expectations of $2.90.

The Great Netflix Recovery

Even though Netflix shares tanked in the middle of April 2022, the stock has managed to stay alive. While share price is certainly nowhere near its highest close price of $691.69 (Nov 17 2021). This means, of course, that not only are most of Netflix's core customer base quite loyal, but the quick shifts they have made since the exodus seems to be helping offset some of the potential losses.

Whatever strategy they have implemented, it seems to be working. Although Netflix shares remain near the all-time low, the fact that the stock has been hovering just south of $200 certainly shows their resilience. Of course, this remains significantly lower than the average Netflix stock price of $446.97, but it is something to celebrate.

A Neutral Rating Moving Forward

It would be nice to have more to say about Netflix stock futures but even a NEUTRAL rating is comforting for a stock that has been extremely volatile. That said, the stock may be poised for a turnaround, thanks to the recent acquisition of a legendary technology company and sales partner.

Indeed, Netflix has chosen Microsoft (NASDAQ: MSFT)  as their advertising partner to develop the new ad-supported membership plans. Not only will Microsoft be a reliable streaming technology partner, but the $10 billion in advertising sales they did last year could be just the thing Netflix needs to shore up revenue losses from the great exodus.

And it may not be much, but the simple announcement of this partnership, in July, was enough to lift Netflix share price by 2 percent.

Netflix: A History

Netflix was originally founded in August of 1997 by Marc Randolph and Reed Hastings. These serial entrepreneurs launched the company in Scotts Valley, California, as a mail-order movie rental service. Of course, since that time, streaming media has become the norm and Netflix managed to make a successful pivot away from physical media to become the most popular and successful streaming platform available today, with more than 151 million paid subscribers across 90 countries.

Because of the platform's steady growth it was inevitable that Netflix would eventually go public. Within five years, then, Netflix launched its IPO on May 23, 2002, at $15 per share.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Netflix (NFLX)$409.23+2.2%N/A44.00Moderate Buy$349.72

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