TLDR:
- Netflix shares rose about 3% in premarket trading after strong Q1 earnings
- Co-CEO Greg Peters noted entertainment sector’s resilience during economic downturns
- Company reaffirmed 2025 revenue forecast of $43.5-44.5 billion
- Lower-priced ad-supported tier accounted for 55% of new sign-ups in available countries
- At least seven brokerages raised price targets for Netflix, bringing median target to $1,147.50
Netflix shares climbed in Monday’s premarket trading following the streaming company’s strong first-quarter earnings report. The stock rose approximately 3% as investors responded positively to Netflix’s upbeat annual revenue outlook.
The company’s shares reached $996.12 in premarket trading, gaining 2.4% while broader market futures declined. The S&P 500 futures fell 1.2% amid growing concerns over U.S.-China trade tensions and President Trump’s criticism of Federal Reserve Chair Jerome Powell.
Netflix reported better-than-expected profit and revenue figures after Thursday’s closing bell. The U.S. stock market was closed on Friday for the Good Friday holiday.
Recession-Resistant Business Model
Co-CEO Greg Peters offered reassuring comments about the company’s ability to withstand economic challenges. “Entertainment historically has been pretty resilient in tougher economic times,” Peters said during a post-earnings video interview. “Netflix specifically also has been generally quite resilient.”
These remarks helped calm investor worries about potential impacts from President Trump’s tariff policies. Some market watchers had expressed concern that these policies could lead to a recession, potentially causing consumers to cut back on streaming subscriptions.
Phillip Securities analyst Helena Wang echoed this sentiment in a research note, writing that “Netflix has historically shown resilience during recessions as consumers saw it as a low-cost entertainment alternative compared to going out.” Wang upgraded the stock to Neutral and noted that the company’s move into live sports programming should help maintain pricing power.
Several analysts raised their price targets following the earnings report. J.P. Morgan analyst Doug Anmuth increased his target to $1,150 from $1,025, while Wedbush’s Alicia Reese raised her target to $1,200 from $1,150.
Growing Ad Business Creates New Revenue Stream
The company’s advertising business has become an important part of its growth strategy. Netflix reported that its lower-priced, ad-supported tier accounted for 55% of new sign-ups in countries where it is available.
“While advertising is a small portion of the business today, the longer-term prospects are robust,” BofA Global Research analysts stated. They added that “investments in ad-tech capabilities should drive healthy growth for years to come.”
Jeffrey Wlodarczak, a five-star rated analyst at Pivotal Research Group, commented that “their advertising business should demonstrate strong growth in any scenario given its nascent state.” This suggests the ad tier could provide a buffer against economic headwinds.
Earlier this month, the Wall Street Journal reported that Netflix aims to double revenue from $39 billion in 2024 and earn about $9 billion in global ad sales by 2030. This ambitious target reflects the company’s commitment to diversifying its revenue streams.
Financial Outlook Remains Strong
Netflix reaffirmed its 2025 revenue forecast of between $43.5 billion and $44.5 billion. This confidence in future performance helped reassure investors worried about potential economic challenges.
The company reported first-quarter earnings above analysts’ expectations on Thursday. Peters noted they had not seen any major changes in customer behavior that would suggest economic concerns were affecting subscription patterns.
Netflix has shifted its reporting strategy this year, no longer disclosing subscriber numbers. This change leaves Wall Street with fewer metrics to evaluate the company’s health, placing more emphasis on revenue growth as a key performance indicator.
At least seven brokerages raised their price targets for Netflix following the results. The median target now stands at $1,147.50, according to data compiled by LSEG.
The streaming giant’s stock performance stood in contrast to some competitors, with shares of Walt Disney and Warner Bros Discovery down under 1% each in premarket trading.
Netflix continues to position itself as a leader in the streaming industry, with a business model that appears well-equipped to handle economic uncertainties. Its diversified approach, including the growing ad business and potential expansion into live sports, may provide multiple avenues for continued growth regardless of broader market conditions.
The stock’s resilience during Monday’s otherwise challenging market environment suggests investors have confidence in Netflix’s ability to navigate potential economic headwinds while maintaining strong financial performance.
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