3. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Fund Investors: 107
Barclays recommends Netflix Inc (NASDAQ:NFLX) as a stock to offset risks in the concentrated market where most of the gains are coming from AI stocks. Barclays isn’t alone. Evercore ISI recently said in a note that Netflix Inc (NASDAQ:NFLX) is in “the strongest position financially, fundamentally and competitively that we have ever seen.” Evercore reiterated an Outperform rating on the stock and increased its price target to $700 from $650.
Sensing major threats amid rising competition in the market from Disney Plus, Peacock (CMCSA), Max. Amazon and YouTube, Netflix Inc (NASDAQ:NFLX) has fired all engines and is using a multi-pronged approach to thrive. Netflix Inc (NASDAQ:NFLX) is expanding into emerging markets, aggressively focusing on user engagement and tapping into advertisement and gaming. Netflix Inc (NASDAQ:NFLX) is also expanding into NFL games and WWE. Netflix’s ad-tier now has 40 million global monthly active users, up from 23 million in January.
Thanks to its aggressive focus on expansion, Netflix Inc’s (NASDAQ:NFLX) revenue stream has become extremely diversified, which can protect it from the headwinds at home. In 2023, Netflix Inc (NASDAQ:NFLX) raked in $14.9 billion revenue from US and Canada combined, while revenue from the EMEA region jumped 8% to $10.6 billion. Latin America and Asia-Pacific revenue came in at $4.4 billion and $3.8 billion.
Netflix Inc (NASDAQ:NFLX) added a whopping 9.3 million subscribers in the first quarter alone, a sign that its strategies are working. For context, Netflix Inc (NASDAQ:NFLX) had added 1.8 million subscribers in the prior-year quarter. The subscriber growth is expected to continue as Netflix Inc (NASDAQ:NFLX) focuses on user stratification and new content. Netflix Inc (NASDAQ:NFLX) is targeting original content spending of $17 billion by 2024.
RiverPark Large Growth Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its first quarter 2024 investor letter:
“Netflix, Inc. (NASDAQ:NFLX): NFLX was a top contributor in 1Q24 following strong fourth quarter earnings and 2024 guidance driven by better-than-expected subscriber adds (+13.1 million versus estimates of +8.9 million). The company’s subscriber growth continued to accelerate following the company’s crack down on password sharing and the rollout of the lower cost, advertising supported subscriber offering known as the Ad Tier. ARPU came in below expectations, but recently announced price increases in the US, UK and France showed signs of moving ARPU higher. NFLX guided 2024 operating margins to 24%, ahead of prior guidance of 22-23%, and guided to 2024 free cash flow of $6 billion.
The recent re-acceleration of subscriber growth, plus price increases on premium memberships and a stabilization of content investments, should position the company for low double digit annual revenue growth over the next few years while driving improved operating margin to more than 25%. We also believe that the stabilization of content spend should allow the company to continue to scale its FCF.”
