NFLX - Netflix: It Should All Pay Off By Early 2025 - Initiating With A Buy

2024-04-22 14:23:32 ET

Summary

• Netflix's revenue is on an upward trend, despite investor concern after management issued a softer revenue forecast for the second quarter of FY2024.
• With double-digit subscriber growth, the ad tier and password crackdown, Netflix should have all it needs to leave this year better than it entered it, in my opinion.
• I think the dip after earnings is a good window for investors to add on the pullback, with Netflix stock down more than 11% since Thursday.
• I share my thoughts on Netflix here and why I think it has more upside in 2024.

Investment Thesis

Netflix ( NFLX ) announced its first quarter of FY2024 results late last week; the streaming company beat quarterly earnings and revenue estimates, plus it achieved a 16% year-over-year growth in global streaming paid memberships. But, the stock is selling off after the announcement last Thursday, down ~11% over the past month, as shown below. I believe the reason behind the sell-off is investor disappointment with management's Q2 and FY2024 guidance. Netflix's management is guiding for 16% year-over-year revenue growth to $9.49B, which trails the consensus expectations that sit at around $49.53B. It's not a huge miss, and Netflix would still be maintaining double-digit top-line growth, but, in my opinion, the market's reaction signifies the over-optimistic sentiment on Netflix's monetization efforts. I think the market priced in a lot of the positives from management's ad tier and their password crackdown initiative, prematurely. I'm initiating Netflix with a buy on pullbacks for the mid-to-long term investor. ...

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