Netflix had a strong quarter with revenue growth and subscriber additions, but overvaluation concerns noted

From Morningstar: 2024-07-19 06:58:00

Netflix’s revenue growth accelerated, and subscriber additions and margins remained high despite the crackdown on password sharing. However, recent results may be a temporary boom, leading to an overvaluation of the stock. Morningstar raised the fair value estimate to $500 per share.

Second-quarter sales for Netflix rose 17% year over year, likely reaching a growth peak. The company has expanded its subscriber base by nearly 17%, adding 8 million members this quarter. Average revenue per member increased in the US, but declined in other regions due to currency weakness and market shifts.

Netflix’s advertising revenue is expected to drive future growth, with plans to launch an ad-tech platform in 2025. Operating margin exceeded 27% in the second quarter, with management forecasting a 26% full-year margin. Free cash flow was down 10% year over year, with $1.2 billion generated in the quarter.

Overall, Netflix’s strong performance in the second quarter is a testament to its ongoing momentum, despite potential future challenges. The company’s expansion of its subscriber base and operating margin increase solidify its position as a leader in the streaming industry.



Read more at Morningstar: Netflix Earnings: Another Great Quarter But Growth…