Thinking about buying Netflix stocks? If you’re looking for a solid investment that’s showing some serious growth potential, Netflix might be worth a closer look. The company just dropped its Q2 results, and things are looking pretty interesting.
Membership and revenue are both on the up-and-up, and Netflix is still holding its own strong despite the fierce competition out there. Their business model is driving even more impressive earnings, and it seems like this positive momentum isn’t going anywhere anytime soon.
With all this good news, it’s no surprise why investors may be led to buy Netflix stocks.
Netflix’s membership growth keeps soaring
Netflix’s Q2 report is making waves, and for good reason! The streaming giant is still riding high with impressive growth in both memberships and revenue.
This streak of acceleration has been going strong for several quarters now, and it’s showing no signs of slowing down.
Some might wonder if this growth is just a bounce-back from the slower periods between 2022 and 2023, or if it’s because Netflix has been cracking down on account sharing.
But the fact that this upward trend has been consistent suggests Netflix isn’t just recovering—it’s really solidifying its spot at the top of the streaming game.
When you look at other streaming services, it’s clear just how well Netflix is doing. For instance, Disney+ saw a drop in subscribers from 157.8 million to 153.6 million in Q2 2024. Even Peacock’s numbers slipped from 34 million to 33 million in the US.
Meanwhile, Netflix keeps attracting more households, showing that people are sticking with it as their main streaming choice and potentially cutting back on other services.
And while Netflix plans to stop sharing subscriber numbers starting in Q1 2025, it’s clear their growth isn’t just a flash in the pan. Even if the pace of new memberships slows down a bit, Netflix seems set to keep its strong position in the streaming market.
Membership growth and ad tiers boost revenue
Netflix’s Q2 earnings are looking stellar, thanks to a surge in memberships and the impact of its new ad-supported tier. The company raked in about $9.56 billion in revenue, marking a 16.8% jump—its biggest quarterly revenue boost in three years.
Moreover, the new ad-supported tier is proving to be a hit, with viewers spending around two hours a day on it, which is on par with the ad-free plans. This shows that the ad-supported option is engaging users just as much as its pricier counterparts.
It’s worth noting that Netflix last raised the price of its Standard plan in January 2022, from $13.99 to $15.49. They also bumped up the Premium plan’s cost from $17.99 to $19.99, and then again to $22.99 in October. Despite these increases, the ad-supported plan, introduced less than two years ago, remains a bargain at $6.99 a month.
Netflix is aiming to make ads a key revenue stream for the future, with plans to phase out its lowest-priced ad-free option. This means that the Standard plan will become the cheapest ad-free choice at $15.49.
Even though the revenue from the ad-supported memberships currently lags behind the ad-free ones, there’s a silver lining.
The ad-supported tier is bringing in money from viewers who might not have paid otherwise, and as Netflix expands its ad offerings and brings in more advertisers, this could turn into a major revenue boost.
Netflix stock: Still a good buy despite big gains?
Netflix stock has been on fire, up 43% over the past year. But even with this impressive rally, it’s clear that Netflix’s valuation still looks pretty appealing.
The company’s revenue growth has picked up speed, and their scalable business model has led to even more impressive earnings. Net income jumped by 44.3% to $2.15 billion, which is pretty phenomenal.
Looking ahead, Netflix is expected to keep up this strong performance. Analysts are predicting an EPS of $19.15 for the full year, which would be a remarkable 59.2% increase from last year.
For the current fiscal year, the expected earnings estimate is $19.08, reflecting a 58.6% rise, and it’s been adjusted upward by 4.2% in the past month.
Next year, estimates suggest earnings could hit $22.72, marking a 19.1% increase from this year’s expectations.
Sales estimates are looking solid too, with a forecast of $9.76 billion for the current quarter—up 14.3% from last year. For the full year, the sales estimates are $38.68 billion and $43.24 billion, showing year-over-year growth of 14.7% and 11.8%, respectively.
With a forward P/E ratio of about 33x based on the current stock price, it’s not too surprising given Netflix’s strong earnings growth and dominant market position. Analysts believe that EPS will keep growing around 20% per year in the coming years, which should support this valuation and possibly even drive further gains.
Should you buy Netflix stock right now?
Netflix shares have taken a hit recently, dropping about 10% over the past month. This dip followed a mid-July sell-off after the company’s revenue guidance fell short of Wall Street’s expectations for the current quarter.
The stock has continued to feel the pinch amid a broader Big Tech downturn, with shares sliding roughly 3% in early trading this week.
But here’s the silver lining: analysts are seeing this dip as a prime buying opportunity. They believe Netflix is well-positioned to boost subscription prices later this year, which could be a game-changer.
Jefferies lead analyst James Heaney is particularly optimistic, noting that the recent 10%+ pullback might set the stage for a price hike in Q4, supported by a strong lineup of new content.
Heaney highlighted exciting upcoming releases like “Stranger Things 5” and “Squid Game 2,” plus Netflix’s recent move into live sports with NFL Christmas Day games and WWE Raw starting in January 2024.
Wall Street’s take on Netflix is also positive. The stock holds a Moderate Buy consensus rating, with 23 Buys, 12 Holds, and just one Sell over the past three months.
With an average forecast of $704.97, Netflix shares could have a 13.2% upside potential. So, if you’re thinking about jumping in, now might just be the right time.
Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.
