Shares of Netflix Inc. are going up sharply on Friday, which is a sign of optimism about user gains that were better than expected in the third quarter.
There were other good things in Netflix’s NFLX 10.27% most recent earnings report, but Barton Crockett of Rosenblatt Securities thinks that the company’s better-than-expected performance on paid net gains was “the main growth positive” that came out of the report.
It’s important to remember that investors won’t be able to praise or criticize subscriber success for much longer. Netflix is not going to post paid net gains every month after its report for the first quarter of next year. That’s because it wants to get investors to pay more attention to its financial story again. It may also be getting ready for slower growth in subscribers going forward, which is what some experts said would happen when the company first announced its plans to change how it reports its finances earlier this year.
Crockett said that the main thing that investors are excited about on Friday is “a metric that won’t be given any more” in 2025. He said that Netflix’s sales performance for the most recent quarter was better than what the company had expected, but that Netflix’s outlook for the coming year seemed “a little weak.”
He wrote, “The outlook for 2025—11 to 13% revenue growth—is said to be driven both by sub growth [which will no longer be disclosed in 2025] and [average revenue per member].” He kept his neutral rating and raised his price goal from $635 to $680. “That fits with what most people think and what we think will happen, but the guide shows that there will be a lot fewer new subscribers in 2025 than in 2024.”
But Netflix stock is still up almost 10% as of Friday morning.
Piper Sandler’s Matt Farrell had a more positive view of Netflix’s future. One of the most important things he learned was that “subscriber growth should once again be the biggest driver” of income growth and that “management was able to meet consensus expectations without announcing a major…price increase” for the US and Canada.
Some people thought Netflix would announce a price increase like this along with the new findings. Because Netflix didn’t do that, Farrell said, investors “still have the positive catalyst as we move through the year.” He stuck with his overweight call and raised his goal price from $800 to $840.
Other experts also thought the future looked bright for Netflix, especially since the company was giving a lot of information about how its advertising tier was doing. In places where Netflix has an ad tier, for example, more than half of all new subscribers in the third quarter chose that plan.
According to Alicia Reese, an analyst at Wedbush, the biggest benefit of the ad tier so far is that it keeps people from leaving, which makes it easier to get new users. “We think Netflix will be able to increase its ad-tier revenue over the next few years as it improves its advertising solutions and targeting, forms new partnerships, and adds more live events.”
For next year, Netflix doesn’t see the ad tier as its main growth driver. But Reese thinks that will change in 2026.
“Even though investors are getting more excited about the advertising potential of upcoming live events like NFL games and WWE events in 2025 and beyond, as well as the growth of games into more licensed intellectual property, we think that Netflix’s stable results will be a welcome calm in an otherwise rough tech world,” she said.
Reese kept her “outperform” rating on Netflix shares and raised her price goal from $775 to $800.
“It is very clear that NFLX is showing huge scale as it continues to produce strong subscriber results and free cash flow, with the ability to invest to speed up that growth,” said Jeff Wlodarczak, an analyst at Pivotal Research. At $900, he already had the highest price goal among sell-side analysts. After Thursday’s report, he raised it to $925 and kept his buy rating.
