Netflix Nears All-Time High as Investors Applaud Ad Momentum and Foray into Live Sports

Infotrading.io - Netflix (NFLX) is approaching its all-time high set in November 2021 as investors cheer the company's expansion into live sports and the impressive growth of its ad-supported tier. The streaming giant's strategic moves are paying off, reflecting positively on its stock price and future outlook.

Strategic Moves Drive Growth

Netflix has recently secured streaming rights to two NFL games scheduled for Christmas Day as part of a three-season deal. Additionally, the company announced at its May upfront presentation that its ad-supported tier has reached 40 million global monthly active users, a substantial increase from the 15 million users reported in November and a significant year-over-year growth.

This growth is partly driven by Netflix's decision to raise prices on its ad-free subscriptions, encouraging more users to opt for the ad-supported offering. The company's crackdown on password sharing has also boosted top-line growth, adding over 9 million new users in the first quarter alone.

Stock Performance and Market Sentiment

On Friday, Netflix shares were trading around $685, nearing the record high of $691.69 achieved on November 17, 2021. Year to date, the stock has risen approximately 40%, although it hasn't been a smooth climb. In April, Netflix's announcement to stop reporting subscriber figures from next year raised concerns about its long-term growth, causing a temporary dip in share prices.

Analyst Insights and Projections

Despite some market apprehensions, several Wall Street analysts remain bullish on Netflix. Needham analyst Laura Martin reiterated her Buy rating and set a $700 price target in a recent note. Martin highlighted the company's global scale, recent price hikes, and ability to bundle services to reduce churn as key growth drivers.

Martin also anticipates further revenue acceleration through advertising, which should expand margins. Netflix reported operating margins of 28.1% in the first quarter and projected full-year 2024 margins of 24%, up from 21% in 2023.

"Netflix represents a scaled, global, premium video platform with a well-known brand and a first-mover advantage," Martin noted. "Margin expansion and rising free cash flow will be key upside value drivers in 2024 and 2025."

Expansion into Live Sports and Events

Netflix has been leveraging live events and sports to drive engagement and subscriber growth. The company's recent agreement with the NFL for Christmas Day games follows a 10-year deal with TKO Group Holdings' WWE, bringing WWE’s flagship program Raw to the streaming service starting in 2025. Additionally, Netflix will host a live wrestling event between Jake Paul and Mike Tyson in November.

Investors view Netflix's acquisition of live sports rights as a positive move, believing that high-quality exclusive sports content will attract new subscribers and increase engagement. Martin emphasized that sports content like WWE and NFL games could drive more significant subscriber growth and engagement than traditional entertainment content.

Innovative Ventures and Future Outlook

Netflix continues to innovate, recently announcing Netflix House, an immersive experience featuring retail, dining, and live attractions based on its popular shows like "Bridgerton" and "Squid Game." This move is part of Netflix's broader strategy to diversify its offerings and create new revenue streams.

"They can do innovative things," Martin told Yahoo Finance about the announcement, describing it as "their version of a theme park." While the return on investment for these ventures remains to be seen, they highlight Netflix's commitment to exploring new opportunities and enhancing its brand value.

Netflix's strategic expansion into live sports and the growth of its ad-supported tier have driven significant investor enthusiasm, pushing the stock near its all-time high. With a robust financial outlook, innovative ventures, and strong market positioning, Netflix is well-poised for continued growth and success.