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- Netflix Stocks are Set to Continue Up
Netflix Stocks are Set to Continue Up
All eyes were on a solid batch of quarterly results released by Netflix. Its share price jumped by almost 10% in the pre-market on January 24. The company managed to sign up more than 13 million extra users from September to December. This clearly marked a greater-than-expected progress in solving the problem of shared accounts, by paid sharing or the password-sharing crackdown, and promoting ad-supported service options, as preliminary analysts suggested nearly 9 million new payed subscribers on average. Even if we take into consideration a prolific Christmas time for family entertainment activity, the year of 2023 represented the strongest-ever final quarter for Netflix net additions, a 71% surge vs Q4 2022. The global streaming leader completed the past year with 260.3 million subscribers across the globe.
Besides, it announced to ramp up its investments in live programming. A more than $5 billion deal with combat sports leader TKO Group was made for exclusive rights to Raw, which is the most popular show on USA Network and online flow of TV translations from World Wrestling Entertainment, with a star Dwayne "The Rock" Johnson entering to the TKO board. "WWE Raw is sports entertainment, which is right in the sweet spot of our fourth business, which is the drama of sport," co-CEO Ted Sarandos said. "Think of this as 52 weeks; a lot of live programming every week every year. It feeds our desire to expand our live event programming... but most importantly, fans love it... It should also add some "fuel" to the new and growing ad business, he also commented.
The quarterly sales rose by 12.5% YoY to set a new record of $8.83 billion, which were slightly above analyst projections at $8.72, yet was a big step compared to $7.85 billion a year ago. Just to compare, a pandemic time record was at $7.71 billion in the Christmas quarter of 2021. In a letter to its shareholders, Netflix stressed the health of its business, predicting double-digit annual top-line growth for the future. The fiscal 2023 operating margin hit 21%, up from 18% in 2022 and ahead of Netflix's own 20% verbal margin target. Free cash flow remained high at $1.6 billion, compared to $332 million a year ago. The advertising business will be the primary driver in 2024, as revenue growth with a mixture of volume and average revenue per member would provide the output, CFO Spence Neumann said.
Other streamers began licensing more of their titles to Netflix, with NBC's Suits, HBO and Disney TV titles as examples. Sarandos added that Netflix has a rich history of helping break some biggest hits made by others, citing Breaking Bad and The Walking Dead, as well as Schitt's Creek, "because of our recommendation, our reach ... because of our distribution". The strong market's response to Netflix Q4 results paves the way for a potential growth to targeting above $600, or even aiming for a repeat of $690+ per share all-time record in 2024-2025.
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