Netflix shares climb to 9-month high as Wall Street cheers 4th quarter subscriber gains, smoothly executed succession plan

Netflix shares ended the week at their highest level since last April, rising more than 8% to $342.50 on Friday after the company reported strong subscriber growth and a smooth transition to the top of its executive ranks.

Netflix stock, which has been an investor darling for more than two decades of public trading, appears to have its mojo back, having already climbed 15% since early 2023.

The catalyst for today’s uptrend, which was nearly three times the stock’s normal trading volume, was Thursday’s fourth-quarter earnings report. The company said it added nearly 7.7 million global subscribers to 230.75 million over the period, far beating analysts’ consensus forecast. Aside from subscriber numbers, results were more mixed, with revenue up just 2% and earnings per share beating estimates by a wide margin. But not only is the company growing again, but it has also attracted an anti-Disney, which announced in the earnings announcement that co-founder Reed Hastings had passed his co-CEO title to former CEO Greg Peters, who share it with Ted. Sarandos shares. Hastings is now Executive Chairman.

Many Wall Street analysts raised their price targets following earnings reports and management comments. The reaction from investors was almost the opposite of what followed two dismal earnings reports in early 2022.

“Netflix represents a frankly unique technology growth story and remains well positioned to generate solid subscriber growth and revenue/free cash flow, even in the face of the fairly high probability of a global recession,” Pivotal Research’s Jeffrey Wlodarczak said in a note to customers wrote. As for the leadership change, “We don’t like Reed H. returning to a more strategic role,” he added, but he added that the move supports Pivotal’s claim that the company could be working toward a sale by 2025 . (Microsoft, already an advertising partner of Netflix, is a leading acquisition candidate, according to Wlodarczak.)

For Michael Morris and his colleagues at Guggenheim, “we see Peters as a complement to the skills that Acting Co-CEO Ted Sarandos brings.” The company reiterated its buy rating on the stock and raised its 12-month price target to $375 from $305. USD.

Bank of America’s Jessica Reif Ehrlich, the analyst selected to moderate Netflix’s quarterly earnings call Thursday, followed with a note reiterating her buy rating and significantly raising her price target to $410 from $375 in free cash flow through 2023 beyond previous expectations. From their point of view, the change of management board is a non-factor. “Netflix appears to have had plans for this succession for years, and we do not expect this leadership change to disrupt the company’s strategic direction or execution,” she wrote.

Not everyone read Thursday’s results Red notice– tinted lenses. MoffettNathanson’s Michael Nathanson maintains a market perform or neutral rating on the stock. In a note to clients, he admitted that after a difficult period “the good mood seems to have returned”. But he warned in a note to clients that the stock had “moved too far and too fast given its fundamentals.”