(Bloomberg) — Netflix Inc. may be struggling to top its mammoth 2024, but Wall Street is optimistic about deals that include big names in entertainment and sports.
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The video streaming company has made a splash with its sports programming, with investors bullish on live events that are more valuable to its advertising business than the type of on-demand programming Netflix has built its library around. He continues to enjoy success there, with the latest Squid Game topping the charts.
“Live events are frankly a huge catalyst because the viewership numbers are crazy and it opens up a new channel for Netflix to further monetize its user base,” said Clayton Allison, portfolio manager at Prime Capital Financial . “While investors want to see numbers that will justify the premium, Netflix is so dominant that I’m not put off having to pay more to own it.”
A November boxing match between Mike Tyson and Jake Paul attracted a global audience to Netflix that peaked at 65 million streams, while two NFL games broadcast on Christmas Day – including one with a performance by Beyoncé at the halftime – attracted more than 24 million viewers each, or more than 24 million viewers. the average audience for professional football broadcasts this season. Shares of the streaming company rose as much as 1.8% on Tuesday before paring much of the gain.
Netflix also purchased the exclusive rights to Raw and other programming from World Wrestling Entertainment. Sports and live events will likely be the focus of fourth-quarter results, expected after Tuesday’s close, and positive commentary could help reverse the stock’s weakness seen earlier this year.
“That’s where they start to make some noise,” said Jay Woods, chief global strategist at Freedom Capital Markets, adding that he would listen for any updates on the next big events planned or on new partnerships during Netflix’s earnings call.
Sport has become increasingly important to media companies, as it remains one of the last bastions of appointments. DirecTV is launching a sports-focused streaming service featuring NFL games, and Walt Disney Co. will merge its Hulu + Live TV streaming service with online sports-focused FuboTV Inc. Disney, Fox Corp. and Warner Bros. Discovery Inc. had plans to create a joint sports streaming service, although that was scrapped earlier this month.
For Netflix stock, it’s been a rough start to the year, underperforming the Nasdaq 100 index after rising 83% in 2024. The stock trades at around 36 times estimated earnings, above the Nasdaq , although it is about half of its past average. 10 years. Just over two-thirds of analysts tracked by Bloomberg hold buy or equivalent ratings, lower than other tech leaders.
Yet since the post-pandemic low, shares have soared more than 400% – and the company has added more than 60 million customers – as measures such as the introduction of advertising and a crackdown on word-sharing of passwords reassured investors about its ability to continue to generate growth. .
In November, Netflix – whose market capitalization of around $370 billion makes it more than 50% larger than Walt Disney Co., Paramount Global and Warner Bros. Discovery Inc. combined – said 70 million viewers watch shows with advertising each month, double the figure. total from May.
“Advertising is the story for the next few years, as Netflix’s user base is one of the most sought-after audiences advertisers can imagine, and improving ad monetization will result in high margin growth without the need to continue adding users,” said Uday Cheruvu, Portfolio Manager. director at Harding Loevner. “Netflix needs to prove that its sports spending will be profitable, but it can do that with advertising, and that’s why the stock still looks attractive here.”
There are headwinds that Wall Street will also be watching, including the impact of foreign exchange on revenue due to Netflix’s large global footprint and the strength of the U.S. dollar. Revenue will increasingly be the focus as Netflix stops reporting the number of subscribers added during each period.
But market players remain optimistic. “If it doesn’t perform the way people expect and the stock goes down a little bit, that would probably be a buying opportunity,” said Hanna Howard, portfolio manager at Gabelli Funds.
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–With the help of Subrat Patnaik.
(Updated stock movement in fourth paragraph. An earlier version corrected DirecTV’s spelling.)
