NFLX - Netflix Stock Investors Missed Out on 1 Key Metric After 10% Earnings Jump!
2024-01-25 15:30:00 ET
Netflix ( NASDAQ:NFLX ) is getting Raw, and investors are super interested. The subscription-streaming service had a lot of good news for investors this week during its financial results for 2023. Yet some analysts still believe that the company’s share price reflects full value. Others think there is a key metric no one is talking about!
So, after a 10% jump, should investors pick up Netflix stock?
Entering the ring
Even before Netflix stock announced its full-year earnings, investors were reading up on headlines that the streamer would purchase WWE Raw for US$5 billion. That’s an enormous investment for the company to get into the live sports arena. However, it seems it’s one the company can afford.
Netflix stock later went on to announce superb earnings. In 2022, the company announced its new tiered system that would support more advertising. By mid-2023, there was a huge crackdown on password sharing, which has stimulated user growth.
By the end of 2023, the focus then was on that subscription growth, and it was huge! There were 260 million paid memberships, up about 30 million from the end of 2022. But while subscriptions are great, there is an even more interesting piece of information that investors need to focus on.
Operating strong
These higher membership rates are incredibly great, sure, but it’s also allowed Netflix stock to see a skyrocket in its full-year operating margin. That reached a whopping 21%! That’s an increase from the already enormous 18% achieved in 2022. But honestly, this deserves more attention.
Operating margin means that for every dollar that the company brings in, Netflix stock will pocket 21%. That’s absolute insanity, and not one other streamer can claim the same. For example, Disney stock has an operating margin of about 8%, and Amazon is at 3.75% as of writing.
And let’s be clear: these are companies that have a lot of other ducks lined up. Netflix stock relies on its streaming and streaming alone at this point. So, how can Netflix have such a high operating margin from just streaming? That’s something investors need to consider.
Future looks bright
So, why are analysts not as into the stock? The operating margin looks great and the subscriptions are steady, but many believe this is already folded into the share price. But frankly, I have to disagree.
Netflix stock has even more growth planned for 2024. First-quarter revenue is expected to be up 13% year over year, which would mark it as the best quarterly growth since 2021. Furthermore, it expects to reach an operating margin of 24% by the year’s end!
What analysts, I think, are missing out on is that it’s not just subscriptions from the password crackdown. Netflix stock manages to continue making these popular shows for a pittance. They have the cash on hand to make small investments in cheap shows around the world, see how they do, and push them globally (hello, Squid Game). And frankly, that’s something that other streamers do not have access to.
Now that the stock is getting into live sports? This could be even more enormous for the company. So, I’m on board with the growth, and certainly on board for more share growth for this stock, and any more opportunities that come its way.
The post Netflix Stock Investors Missed Out on 1 Key Metric After 10% Earnings Jump! appeared first on The Motley Fool Canada .
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy .
2024