By Investors poured into Netflix shares on Friday, sending the stock to record highs after the streaming giant’s solid third-quarter earnings report.
The stock closed at $763.89, finishing the day higher by 11%.
The surge came after Netflix reported a strong earnings beat and gave positive forward guidance that gave investors confidence about its position in the streaming wars.
Netflix’s quarterly revenue came in at $9.83 billion, slightly above a Bloomberg consensus estimate of $9.78 billion, while new subscribers also beat estimates, totaling 5.07 million, outpacing expectations of 4.5 million.
That growth is a sign that Netflix’s push to crack down on password sharing is still drawing new subscription sign-ups, even as analysts questioned that possibility ahead of earnings.
The platform’s new ad-supported membership tier, in particular, saw huge growth, soaring 35% from the second quarter and accounting for over half of signups in countries where it’s currently available.
The streaming giant also gave strong forward guidance, with expectations for fourth-quarter revenue to surge 14.7% to $10.13 billion and next year’s revenue to come in between $43 billion to $44 billion. That revenue estimate is upwards of 11% growth from this year’s revenue expectations of $38.9 billion.
Several analysts upped their price targets following the earnings report.
UBS raised its price target for the stock from $750 to $825, citing future revenue growth and the company’s balance between expansion and investment in ads, gaming, and live content.
Bank of America analysts also see multiple drivers into next year, and upped their price objective from $740 to $800.
“In our view, Netflix remains one of the best positioned companies within media and has several growth drivers,” the analysts said in a Friday note.
“Supported by its world-class brand, leading global subscriber base, position as an innovator and increased visibility in growth drivers, we believe that Netflix should continue to outperform,” they added.
Morgan Stanley analysts bumped their already-bullish view on the stock up to $830 from $820, citing the potential to raise earnings by 20%-30% over time with strong prospects in gaming, live content, and advertising.
Morgan Stanley analyst Benjamin Swinburne said the latest earnings reinforce the firm’s bullish price target of $1,050 for the stock, which implies over 37% upside from the current price.
He said Netflix’s latest earnings and free cash flow set it apart from the competition in the increasingly fierce streaming wars.
“They’re going to generate about $50 billion of free cash flow over the next four years. That gives them tremendous ability to invest back in the business at levels that really, frankly, their media competitors can’t,” Swinburne said in a Friday interview with CNBC.
