Netflix shares reached an all-time high on Friday, rising nearly 10% as investors expressed confidence that the company’s strong content offerings will help it maintain healthy subscriber growth, even as the impact of its password-sharing crackdown begins to fade.
The streaming giant, seen as the frontrunner in Hollywood’s streaming competition, is expected to add over $28 billion to its market value of approximately $295 billion if these gains hold. Netflix exceeded expectations for quarterly subscriber additions by over 1 million and is projecting even higher sign-ups in the final three months of the year, especially with the return of the popular South Korean drama “Squid Game.”
In addition to strong subscriber growth, Netflix also reported profits and revenues that surpassed estimates, signaling a successful shift in focus away from subscriber numbers alone. Analysts have warned of a potential slowdown in sign-ups following the success of the password-sharing measures, with Netflix adding 5.1 million users in the third quarter compared to 8.76 million in the same period last year.
Matthew Dolgin, an analyst at Morningstar, noted that while the third quarter showed the expected slowdown in subscriber growth, Netflix has opportunities to boost its financial performance in other areas. Part of this strategy includes increasing subscription prices. Recently, Netflix raised fees in regions such as Japan, the Middle East, Africa, and parts of Europe, and it plans to increase prices in Italy and Spain, with some analysts anticipating a similar move in the U.S. next year. Although Netflix did not announce any immediate price changes, Bernstein analysts indicated that there is potential for further price increases with stronger user engagement.
The ad-supported tier of Netflix is also making progress, accounting for over 50% of sign-ups in regions where it is available during the third quarter. However, Netflix does not expect advertising to be a major growth driver until 2026.
Following the latest results, at least 20 analysts raised their price targets for Netflix shares, bringing the average target up to $760 from $706.38, according to LSEG data.
Currently, Netflix’s shares are trading at 30.40 times the estimated profit for the next 12 months, which is significantly higher compared to Walt Disney’s 18.50 and Comcast’s 9.65.
This year, Netflix’s stock has increased by about 41.2%, while Disney’s stock has gone up by 6.9%, and Warner Bros. Discovery has seen a decline of about 31%.
Netflix is counting on a strong slate of upcoming content, including the new “Knives Out” movie, the latest season of “Stranger Things,” and live events like two National Football League games on Christmas Day to attract new subscribers.
Matt Britzman, a senior equity analyst at Hargreaves Lansdown, pointed out that traditional media companies are struggling financially, which allows Netflix to strengthen its position in content creation while its competitors hesitate to invest more capital.
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