Netflix Stock Rises on Positive News from Stock Story

Netflix's stock surged 7.9% after beating revenue expectations and strong user growth. Analysts are bullish, but is it a buy?

Netflix (NASDAQ: NFLX) experienced a significant 7.9% jump in its stock price following the release of its fourth-quarter results, which surpassed Wall Street's revenue expectations and showed strong user growth. The company added 13.1 million net subscribers, exceeding expectations of 8.8 million. Additionally, average revenue per user (ARPU) outperformed in every region except Asia-Pacific, contributing to the revenue beat.

Looking ahead, Netflix forecasted a 16% year-on-year revenue growth, excluding the impacts of foreign exchange, and increased its full-year operating margin guidance. The company also provided EPS guidance above expectations. Despite initial uncertainty surrounding the introduction of a paid sharing and ad-supported product tier, this quarter's results reassured the market that these decisions were likely beneficial for Netflix.

Regarding advertising, Netflix highlighted the opportunity for significant new revenue and profit pools in the medium to longer term, with a nearly 70% increase in ads membership quarter over quarter. The company also expressed confidence in its ability to compete in a consolidating industry, emphasizing its vast opportunity and hinting at potential pricing power.

Overall, these strong quarterly results indicate that Netflix is on track, setting a positive tone for tech stocks heading into the new earnings season. Following the release, Macquarie analyst Tim Nollen upgraded the stock's rating from Neutral to Outperform and raised the price target from $410 to $595.

Netflix's shares have shown significant volatility over the past year, with several moves greater than 5%. Today's move suggests that the market considers this news meaningful but not fundamentally altering its perception of the business. The most significant move in the past year occurred nine months ago when the company's stock dropped 12.5% due to slightly weaker-than-expected sales and guidance for the next quarter. The delayed rollout of its paid-sharing feature was also a factor in the market's reaction.

Despite this volatility, Netflix has seen a 17.3% increase since the beginning of the year. Investors who bought $1,000 worth of Netflix shares five years ago would now have an investment worth $1,683.