NFLX stock forecast: why it’s definitely one to watch
The Netflix stock forecast for 2022 reflects a comeback in subscriber growth after a disappointing start of 2021
Like a good movie, the Netflix stock forecast improved as 2021 went on. It started by falling two million short of the expected six million new subscribers and beat Q3 expectations by 500,000 with 4.4 million newcomers worldwide.
The early months of the Covid-19 pandemic led to unprecedented growth for the entertainment giant, as locked-down customers looked for things to watch. A slowdown was inevitable as some economies started returning to normal.
A closer look reveals half the new subscribers in the quarter came from Asia Pacific and a sizeable 1.8 million from Europe, the Middle East and Africa. Only 70,000 were US and Canada subscribers; but that is preferable to the 400,000 Netflix lost in Q2.
Despite Netflix admitting that the pandemic had caused “lumpiness” in membership growth, there were some encouraging numbers for the NFLX stock forecast. Revenue in this latest quarter rose by 16% year-on-year to hit $7.5bn (£5.6bn), while operating income increased by 33% year-on-year to reach $1.8bn. Netflix had 214 million paying customers around the world through the end of September 2021, ahead of the company‘s own predictions.
In a letter to shareholders, Netflix said:
“We’re very excited to finish the year with what we expect to be our strongest Q4 content offering yet, which shows up as bigger content expense and lower operating margins sequentially.”
Netflix stock in Q3 was buoyed by a South Korean-import hit, the survival drama Squid Game. The biggest TV show in Netflix history drew the eyeballs of 142 million subscriber households, for at least two minutes, in the first four weeks. The number one program in 94 countries inspired Saturday Night Live sketches, TikTok clips, memes and Halloween costumes.
“Sometimes you think you’ve got lightning in a bottle and you’re wrong. And sometimes, you think you’ve got a great Korean show that turns out to be lightning in the bottle for the world,” said Ted Sarandos, co-CEO and chief content officer, in the quarterly call with analysts.
It didn’t end there. The quarter included 44 Emmy awards – beating other networks and platforms for the first time ever – and other hits, such as La Casa de Papel (aka Money Heist), Never Have I Ever, He’s All That and Chestnut Man.
Subscriber retention forecasts are nearing pre-Covid levels, despite recent price increases. They forecast a full-year operating margin of 20% or better, owing to the backloaded content schedule.
What weighs heavily on Netflix stock predictions is the threat posed by an ever-growing number of rivals in the streaming space, Disney, Amazon and Apple among them. Consumers can only stomach so many price increases, especially if they have signed up to multiple services. Viewers may also chop and change their memberships in line with the platforms that have TV shows and films they want to watch, meaning Netflix is under continuous pressure to deliver content that gets people talking.
According to subscription market analyst Antenna, Netflix remained the biggest force with 30% marketshare in its quarterly growth report. That was 2% less than Q2, as Peacock and Paramount grew 1% each and Apple TV hit 5%. In mid-November, Netflix began reporting number of hours watched. Not surprisingly, Squid Game led with 2.1 billion weekly hours viewed – or 239,700 years, according to CNET number crunchers.
A crucial target for the Netflix stock forecast is its goal to add 8.5 million net subscribers in Q4.
Netflix forecast: game on
The Netflix stock price hit an all-time high when it closed 29 October at $690.31, 10 days after Q3 results emerged. However, there were some headline-grabbing details in its letter to shareholders that suggest the company is not sitting still in its quest for eyeballs.
The Q4 slate includes English language series like The Witcher, You, Tiger King and Cobra Kai, big returning non-English series like Sintonia and the final chapter of La Casa de Papel. Plus features like Red Notice (starring Dwayne ‘The Rock’ Johnson and Ryan Reynolds), Don’t Look Up (Leonardo DiCaprio, Jennifer Lawrence, Tyler Perry and Meryl Streep) and The Harder They Fall (Jonathan Majors, Zazie Beetz and Idris Elba).
On the acquisition front, Netflix bought the Roald Dahl Story Company, which includes favourites like Charlie and the Chocolate Factory, James and the Giant Peach and The BFG. Its games division also snapped up Night School Studio, which is behind games like Oxenfree. The company has now confirmed that it plans to expand further into games, explaining:
“For now, the games available on Netflix are part of a long-term growth strategy and not a short-term profit centre. They’re included in subscriptions and will not contain advertising or in-app purchases. It’s all about the game, for now.”
Said co-CEO Reed Hastings of Netflix’s ambitions to beat an older competitor in the games space:
“A company like Disney is still ahead of us in some of those dimensions of putting that whole experience together, but boy, are we making progress. And so exciting over the next three to five years, kind of closing that gap. And hope to pass them on that spectacular all-around experience.”
NFLX price history
|Jan 21, 2022||404.80||-1.11||-0.27%||405.91||407.95||404.66|
|Jan 20, 2022||405.91||-108.08||-21.03%||513.99||525.88||404.05|
|Jan 19, 2022||513.78||5.35||1.05%||508.43||522.55||505.94|
|Jan 18, 2022||508.64||-7.44||-1.44%||516.08||521.14||508.12|
|Jan 14, 2022||525.73||5.31||1.02%||520.42||537.55||511.28|
|Jan 13, 2022||518.52||-17.14||-3.20%||535.66||540.02||517.42|
|Jan 12, 2022||535.48||-5.12||-0.95%||540.60||546.25||531.44|
|Jan 11, 2022||540.60||1.20||0.22%||539.40||543.23||529.43|
|Jan 10, 2022||539.40||-2.11||-0.39%||541.51||543.60||525.65|
|Jan 7, 2022||539.40||-16.98||-3.05%||556.38||556.38||537.58|
|Jan 6, 2022||555.53||-11.84||-2.09%||567.37||568.34||541.45|
|Jan 5, 2022||566.89||-20.33||-3.46%||587.22||592.02||564.03|
|Jan 4, 2022||587.85||-8.59||-1.44%||596.44||602.05||580.94|
|Jan 3, 2022||596.44||-5.53||-0.92%||601.97||607.78||589.86|
|Dec 31, 2021||602.68||-8.94||-1.46%||611.62||614.09||601.33|
|Dec 30, 2021||611.76||3.50||0.58%||608.26||619.79||608.25|
|Dec 29, 2021||608.25||-1.89||-0.31%||610.14||612.50||603.99|
|Dec 28, 2021||610.32||-1.01||-0.17%||611.33||617.73||608.82|
|Dec 27, 2021||611.33||-2.97||-0.48%||614.30||615.62||608.69|
|Dec 24, 2021||613.83||-0.17||-0.03%||614.00||614.07||613.83|
According to CNN Business, the Netflix stock forecast for 2022 is looking rather upbeat. The median view of 41 analysts indicates a 16.7% bump to $706 over the next 12 months. The high-end estimate predicts a ceiling of $800. However, a low-end forecast of $342 has been made too, a 43.5% fall from the stock’s current level.
Overall, 28 of 48 analysts polled say that Netflix stock is a buy, while seven expect it to outperform the wider market. Nine hold ratings are in place, one analyst believes NFLX will underperform, and three say sell.
Understandably, there is a lot of enthusiasm surrounding the Netflix stock forecast for 2025, and this question in particular: will Netflix stock go up?
Of course, it is difficult to know what lies ahead for NFLX. Although the streaming giant was a first mover in its space, competition is starting to heat up and traditional broadcast networks are now beginning to spend big bucks on their own offerings.
Netflix does not appear to be too fazed by this competition. Its co-CEO, Hastings, made it clear that the company expects to increase its share of screen time worldwide. “Streaming is developing at a great pace, all kinds of devices and competitors helping that market growing," he said.
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The views expressed in this article are those of the writer and do not represent trading advice. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.