Why Netflix Is Irresistible Even At All-Time Highs

Key Points

• Netflix shares have been rallying hard for more than 2 years.
• Yesterday, we saw them close at a record high, with more gains likely. 
• There have been some recent concerns, but these are few compared to the many bullish calls.

It might seem strange to say a stock is still irresistible after it’s rallied 350% and just closed at a new high, but it’s hard not to with Netflix, Inc NASDAQ: NFLX. For a company that had to watch its shares lose 80% of their value just 2 years ago, it’s been a remarkable turnaround and one that looks likely to continue. 

During the pandemic-fuelled bull run, Netflix found itself a key member of the much-acclaimed FAANG group of tech stocks. But as the bubble started to pop around November 2022, they were the stock that fell the hardest and further. For investors who managed to ride out that volatility or who have been able to get involved during an earlier phase of the current rally, it must be a particularly sweet turn of events. 

As we round the corner into the last few months of the year, it’s Netflix’s shares that have tacked on the most value in the past 12 months and, in many ways, look the strongest heading into 2025. So what’s behind the recent success of the streaming giant, and what makes them still so irresistible? 

Bullish Fundamentals 

Well for starters, the company has managed to turn its fundamental performance around, and absolutely crushed analyst expectations for its most recent earnings report. It was their highest ever revenue print and one of their most profitable quarters ever. This momentum has continued into October, with fresh headlines this week showing the company’s UK subsidiary closed out 2023 with a record revenue of more than $2 billion. 

The analysts have not lost sight of this strong fundamental performance, either. Since the end of the summer, they have been making a steady stream of bullish calls on Netflix shares. Both Evercore and Pivotal had Buy ratings at the end of August, the latter giving the stock a street-high price target of $900. 

These were added to this week by the teams over at Piper Sandler, TD Cowen and JPMorgan Chase, who all reiterated their Buy ratings on Netflix shares as well. Even though their price targets aren’t quite as lofty as Pivotals, which points to a targeted upside of some 25%, they were both well ahead of the $727 that the stock closed at on Wednesday evening. 

Optimistic Outlook for Netflix

Much of the bullish narrative revolves around Netflix’s impressive subscriber growth, which has been landing in ahead of expectations and is on track to hit 370 million this year. There’s also Netflix’s strong positioning from a market share perspective, with bullish analysts seeing it as the premier dominant paid global streaming service. 

In addition, the company’s growth in both average revenue per user and free cash flow have both been earmarked as key tailwinds that should continue powering the stock’s to highs in the coming months. Evercore even went so far as to say that Netflix is in “the strongest position financially, fundamentally, and competitively” that they have ever seen. 

Getting Involved with Netflix Stock

However, that’s not to say investors should expect it to be all plain sailing. While the majority of analysts are bullish on Netflix, there are some who have taken a more cautious stance. Earlier this week saw the team at Barclays downgrade their rating on Netflix shares to a rare Sell. In a note to investors they wrote “Netflix’s premium valuation is predicated on revenue growth being at least in the low double-digit range, which in our view, will get increasingly difficult”. 

And while the past month has seen the likes of Rosenblatt Securities and China Renaissance stop short of rating the stock a full Buy with their updates, they held off moving Netflix to a Sell, choosing instead to rate it a Neutral. It’s something for investors to consider, but it’s worth pointing out that these more bearish calls are very much in the minority. Looking at MarketBeat’s analyst forecast tool, we can see that out of 36 analyst ratings on Netflix, only 7% rate it a Sell, while close to 70% rate it a Buy. 

Based at the current price action ahead of next week’s earnings report, it’s fair to say that Wall Street has no hesitations about continuing to buy into Netflix at these levels.