Netflix likely to remain king of streaming, despite growing competition

After years of dominating the video streaming market, Netflix, Inc. (NASDAQ: NFLX) further strengthened its position by adding a record number of new subscribers in the fourth quarter. The market reacted positively to the blowout results, and the stock climbed to a new high this week. Despite recent challenges, the company has maintained its market share and successfully navigated the competitive landscape.

Stock Rallies

On Friday, Netflix’s stock traded at a record high of around $975, maintaining the post-earnings upswing and reversing the slowdown experienced in the early weeks of the year. It is worth noting that the value has nearly doubled in the past twelve months, making NFLX one of the top-performing Wall Street stocks. The stock regularly outperformed rivals and the S&P 500 index. Even after the strong gains, it appears that the shares have the potential for more growth and are on track to cross the $1,000-mark in the coming months.

In the final months of fiscal 2024, a total of 18.91 million new subscribers joined the Netflix platform, an all-time high, and the company ended the year with 301.63 million paid members. That drove Q4 revenues to an impressive $10.25 billion, up 16% from the year-ago quarter. Net income increased to $1.87 billion or $4.27 per share in the December quarter from $938 million or $2.11 per share in the corresponding period of 2023. Both revenue and profit topped the market’s expectations, continuing the recent trend.

Prices

The company recently raised prices of its ad-supported and standard streaming plans in the US and is planning to increase prices in other markets too. Its stable performance in recent years shows that previous price hikes did not have a major impact on revenues. As part of its efforts to increase the number of paying customers, the management recently launched an extensive crackdown on password-sharing.

From Netflix’s Q4 2024 earnings call:

“At a high level, we’ve seen broad strength across content categories, across all regions. We’ve seen it throughout the entire year. And as we’ve consistently seen across our history, no single title really drives a majority of our acquisition or engagement. So, even in an amazing quarter where we had three huge live events, we had an incredible fight, two NFL games; we had one of our biggest TV series ever in “Squid Game” season 2; all very successful events and titles that we are thrilled about, our estimates for subscriber ads driven by those titles combined represent a small minority of our total member acquisition in the quarter.”

Gamechanger

Of late, the tech firm has been focusing on areas like live sports by partnering with WWE and NFL, giving stiff competition to leading sports broadcasters like ESPN. With a rapidly growing user base, the advertising business will be another key priority for the company this year. However, Netflix needs an effective strategy to compete with core-business rivals like Disney, Hulu, and Amazon Prime.

Netflix shares traded up 2.5% on Friday afternoon, after gaining more than 50% in the past six months. The current value is 40% above its 12-month average price.