NFLX - Netflix Thrives As They Focus On Engagement

2024-04-24 23:02:05 ET

Summary

• Netflix will stop reporting quarterly membership and average revenue per membership in Q1 2025.
• Autoplay has increased user engagement, with shorter countdowns resulting in more hours watched.
• Netflix's valuation range is estimated to be between $240 billion and $290 billion.

Introduction

Per my January article , Netflix ( NFLX ) shines with global distribution. This is one of the reasons why their economics are solid and the 1Q24 letter says revenue and operating margin have been the key financial metrics over the years, while engagement has been a nice estimate of customer satisfaction. Membership growth was important when Netflix was subscale, but they are a mature company now. The 1Q24 letter says they will stop reporting quarterly membership and average revenue per membership (“ARM”) in the first quarter of 2025 (emphasis added):

Now we’re generating very substantial profit and free cash flow ((FCF)). We are also developing new revenue streams like advertising and our extra member feature, so memberships are just one component of our growth . In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country , each incremental paid membership has a very different business impact. It’s why we stopped providing quarterly paid membership guidance in 2023 and, starting next year with our Q1'25 earnings, we will stop reporting quarterly membership numbers and ARM.

For further details see: