Netflix had its strongest period of subscriber growth in the second half of 2024 since the pandemic, adding 24 million subscribers over the last six months.
The subscriber growth remarkably came with high efficiency, notes MoffettNathanson Senior Analyst Rob Fishman, as Netflix spent just $68 in marketing expense per subscriber.
“With management’s decision to no longer disclose subscriber counts from Q1 onwards, it is unlikely we will be able to track the quarterly or regular cadence of how subscribers grow from here — aside from key milestones,” Fishman notes in an investor report.
So how much more room can subscribers grow?
“It is likely Netflix has a few more quarters of strong subscriber growth driven by its content slate and ad-tier, but we do expect the benefits of the password-sharing crackdown to slow,” Fishman concludes.
The question for some investors and media analysts is what the definition of “slow” may be for a juggernaut with a stock price in the mid-$900 range. For Fishman, Netflix enjoys an enviable position as “the default place to watch long-form content,” allowing it to license content on a non-exclusive basis more cost effectively “and seemingly without a deterioration in engagement.”
Interestingly, of the 20 most-watched acquired shows on the platform, only three are exclusive to Netflix in the U.S. Meanwhile, Netflix-produced shows around the world continue to attract exclusive audiences. This includes Brazil’s “De Volta Aos 15,” with superstar actress Maisa; and Germany’s “Cassandra,” a retro science-fiction thriller that won the attention of ABC News in February as a “binge-worthy” limited series.
With average global subscriber growth of 11%, this translated to a 6% decline in average daily engagement per global subscriber, Fishman finds. This is an improvement from the double-digit decline seen in the first half of 2024. “While the math suggests subscribers were simply watching less content on Netflix in the second half of 2024 compared to last year, it is clear from the sub growth that Netflix’s password-sharing crackdown has successfully reduced the number of users per subscription,” he concludes.
For MoffettNathanson, pricing of Netflix anywhere close to $1,000 per share is too lofty. As such, the 1-year price target consensus estimate of $1,071.74 is nowhere in Fishman’s consideration. Rather, MoffettNathanson reiterates its “Neutral” rating on Netflix and a much more modest $850 price target.
MoffettNathanson values Netflix using an 18x EV/EBITDA multiple on its estimated 2030 GAAP EBITDA, discounted back three years.
