Netflix’s (NFLX) shares jumped on Wednesday after its fourth-quarter revenues beat estimates but received a downgrade from Deutsche Bank (DB).
The US company’s stock advanced 10.70% to $544.87 per share on January 24 for a three-session win streak but slid 0.07% in after-hours. Analysts predict a 0.92% decline to $539.50 apiece due to short-term profit-taking in the coming market session.
On Tuesday, the streaming giant revealed that 13.12 million people signed up for its services in Q4 2023. The figure was its highest quarterly subscriber growth since the pandemic began and topped estimates of 8.97 million subscribers by 46.27%.
In addition, the data marked a 71.06% year-over-year increase from the 7.67 million paying users added in Q4 2022. It also pointed to a 49.09% quarter-over-quarter rise from the 8.80 million new subscribers posted in the July-September period.
Netflix reported net additions of approximately 30.00 million last year for a total global subscriber count of 260.28 million. It contrasted the 8.90-million increase in 2022, which sparked worries about the firm losing ground to competitors.
Industry watchers said the intensified password-sharing crackdown was the biggest contributor to the subscriber surge. 40% of new subscribers opted for the ad tier plan, which costs $6.99 monthly but allows advertisements to show.
As Netflix phased out its $11.99 per month ad-free basic plan, new users who prefer ad-free viewing would need to subscribe to the $15.49 per month option.
Deutsche Bank Expects Netflix Peak This Year
Following the earnings report, Deutsche Bank lifted its 2024 share price target for Netflix by 14.13% from $460.00 to $525.00.
Still, the German multinational investment bank downgraded the Los Gatos, California-headquartered company’s rating from ‘Buy’ to ‘Hold’.
Deutsche Bank stated that it projects Netflix to peak at an earnings per share (EPS) growth of 38.00% this year. However, several years of deceleration are expected to follow, with EPS growth slowing to 21.00% in 2025 and 16.00% in 2026.
The bank emphasized Netflix’s struggles with attracting advertisers unfamiliar with streaming services. Moreover, revenue growth from the password-sharing crackdown and price hikes are likely to hit the ceiling ultimately.
Netflix Co-CEO Greg Peters said the firm intends to prioritize scaling its ad business over the next few years.
