Americans put so much time into watching streaming media it could double as a part-time job.
And that’s not hyperbole, hot air or a hatful of hooey.
Don’t miss the move: Subscribe to TheStreet’s free daily newsletter
Those are the results of a recent survey by Forbes Home and OnePoll that found Americans are dedicating an eye-popping three hours and 9 minutes each day to streaming digital media
“In today’s digital age, streaming media has woven itself into the fabric of daily life in America,” the report said. “This significant investment of time underscores the central role that streaming services play in entertainment and information consumption for the average American.”
The study, released in August, noted that streaming services have achieved “a near-ubiquitous presence in American homes.” Fully 99% of U.S. households subscribe to at least one streaming service.
“Netflix’s position as the leader in the streaming-service market is undeniable, with a remarkable total of 260.28 million subscribers worldwide,” Forbes said. “This number reflects a significant increase of 5.3% from the previous quarter and a near 13% growth year over year.”
Netflix executives are feeling optimistic about the Los Gatos, Calif., company’s future. In July Chief Financial Officer Spencer Adam Neumann told analysts that the streaming giant was “pleased with our performance in Q2.”
Analysts are updating their price targets and ratings for Netflix. Photo by Phil Barker/Future Publishing via Getty Images.
Future Publishing/Getty Images
Netflix CFO cites ‘strong performance across the board’
“There were strong performance across the board, good momentum across the business, strong revenue growth, member growth, and profit growth,” he said.
Revenue surged 17% from the previous year to roughly $9.6 billion, driven primarily by higher average paid memberships.
Related: Analysts say buy the dip in Netflix stock, here’s why
Netflix, which beat Wall Street’s forecasts, said it had a wide variety of hit series in the second quarter including “Bridgerton Season 3,” “Baby Reindeer,” “Queen of Tears” and “The Great Indian Kapil Show.” Also on the list were films including “Under Paris,” “Atlas” and “Hit Man.”
The company said “The Roast of Tom Brady” “attracted our largest live audience yet.”
“We began testing a new, simpler and more intuitive TV home page in June, which we believe will significantly improve the discovery experience on Netflix,” the company said in a letter to shareholders.
Global paid memberships rose 16.5% year over year to 278 million, marking one of the final times Netflix will update membership numbers.
Earlier this year, Netflix said it would stop reporting quarterly subscriber numbers starting with its first-quarter 2025 earnings. The company said it’s more focused on other metrics.
Netflix will also stop reporting average revenue per member, or ARM, which is total revenue divided by the number of users over a set period.
In November 2022 the company started offering lower-cost plans that included ads. In its Q2 2024 report the company said that “we’re making steady progress scaling our ads business.”
“Ads tier membership grew 34% quarter on quarter, and we’re building an in-house ad tech platform that we’ll test in Canada in 2024 and launch more broadly in 2025,” the quarterly update said.
The company said that ads fulfilled two important strategic priorities.
“First, they enable us to offer lower prices to consumers; and 2nd they create an additional revenue and profit stream for the business,” the letter said. “Just over 18 months since launch we continue to scale our ads tier, which now accounts for over 45% of all signups in our ads market.”
Netflix shares are up nearly 46% year-to-date and roughly 86% from a year ago.
Analyst: Netflix ‘a clear leader in streaming’
Analysts issued research notes on Oct. 7 for Netflix, which is scheduled to report third-quarter earnings this month.
Piper Sandler analyst Matt Farrell said Netflix “is a clear leader in streaming,” according to The Fly. He upgraded the company to overweight from neutral and boosted his price target to $800 from $650.
The analyst said the investment firm’s prior neutral stance was centered on valuation, but now he now appreciates “the company is expensive for a reason.”
More Tech Stocks:
Analysts revise Corning stock price targets after investor meetingAnalyst revamps Salesforce stock price target after conferenceAnalysts praise groundbreaking Tesla rival, preview robotaxi event
Moving forward, Netflix still has levers to pull in the ads-free business, particularly around pricing, “while the ads-tier has been largely derisked heading into next year,” Farrell said.
The analyst said Wall Street consensus margins could also prove conservative in 2025 and 2026 based on the incremental margins over the past few quarters.
Farrell sees “multiple scenarios to positive estimate revisions.” and said that in a potentially weaker macroeconomic environment, Netflix’s subscription-based model “becomes even more attractive.”
TD Cowen, Barclays weigh in on Netflix
TD Cowen analyst John Blackledge raised the firm’s price target on Netflix to $820 from $775 while maintaining a buy rating on the shares.
In a preview of the company’s third-quarter results, Blackledge said he expected paid quarterly net member additions of more than 4.88 million. That’s above consensus of more than 3.89 million and reflects further paid sharing tailwinds, underlying business strength, and momentum in AVOD, or advertising-based video on demand.
Barclays analyst Kannan Venkateshwar downgraded Netflix to underweight from equal weight, leaving his price target at $550. Netflix’s “premium valuation” is predicated on revenue growth being at least in the low-double-digits percent “for some time,” the analyst said.
Venkateshwar said this target would get more difficult and the company’s growth algorithm “will come with tradeoffs.”
Even if Netflix gets to its revenue goal, the stock’s valuation “implicitly prices in” more than a doubling of the subscriber base from present levels, “which seems unrealistic,” the analyst said.
Related: The 10 best investing books, according to our stock market pros
