Did Netflix’s value proposition get a boost after its stock split?

Phillip Nova高级投资分析师林知霖先生

The stock (NSDQ: NFLX) is now trading at $104.40 at the close on 25 November. Stock splits make a stock more liquid and easier to trade, as significantly less capital is required to buy the stock. Prior to the split, Netflix was trading above $1,000 a share.

Netflix is worth more than Walt Disney, Comcast, and Warner Bros combined in terms of market cap. 

• 3Q Revenue rose 17% to $11.5b, matching estimates. 
• However, Operating Income $3.248b vs consensus $3.633b due to Brazilian tax expense. The company had to pay $619m to settle a multi-year tax dispute with Brazilian authorities going back to 2022.
• Excluding the one-time Brazilian tax expense, Adj. Operating Income would have exceeded consensus expectations.
• Record engagement levels achieved, with highest-ever TV viewing share in both US (8.6%) and UK (9.4%).
• Pricing power: Netflix has been able to hike prices (US in Jan 25′ and SG in Apr 25′) of its membership tiers without eroding subscriber numbers.

EARNINGS:

• Advertising business showed strong growth, revenue from ads on track to more than double in 2025, but remains a small portion of overall business. Revenue gains from subscriber growth and price hikes are exceeding content spend. 
• Strong content performance— with KPop Demon Hunters becoming Netflix’s biggest film ever alongside Squid Game Season 3.
• Successful expansion into live sports, with Canelo-Crawford fight becoming the most viewed men’s championship fight this century.
• Management stressed that strong market opportunity remains— with Netflix only capturing about 7% of the addressable market in consumer spending and 10% of TV time in their biggest market.
• Strong program lineup for Q4— last season of Stranger Things, Knives Out, and NFL games on Christmas Day.
• Live events, while successful, represent only a small portion of overall revenue and viewing hours.
• Ongoing uncertainty around access to 3rd-party content due to supplier relationships with competitors.

GUIDANCE:

• Sees FY25 Revenue at $45.1b, raised from $44.8b – $45.2b prior. Slightly higher than ests of $45.02b.
• NFLX cut its operating margin guidance for 2025, lowering it to 29% from 30% prior due to the impact of the Brazilian tax matter.  
• Raised its free-cash-flow forecast for the full year to $9b from $8 – $8.5b prior, citing lower content spending.

ANALYST COMMENTS: Netflix pivoting towards an entertainment provider and away from just a streaming platform.

• Brazil tax matter unlikely to have any long-term effect. It should be noted that peers are also impacted and this issue is not an isolated matter.
• Expect continued strength and momentum in terms of subscribers, pricing and advertising, anchored by an extremely strong content slate.
• With FY24 subscribers at 301.6m, Netflix has stopped disclosing subscriber numbers. Nevertheless, they are targeting 410m subscribers by 2030, implying yearly subscriber gains of ~18m, which we think should be attainable given that average subscriber additions was ~26.9m a year from 2020 to 2024.
• ***Assuming FY30 average monthly revenue per subscriber of $15 (up from $11.70 in FY24), this would imply FY30 revenue of ~$73.8b.
• Anchored to a P/S ratio of 8.0x, this would imply a target price of ~$136.04. (30% upside to current price of $104.40)
• Ramp-up in ad business: Live events will boost ad monetization, as ads will run across all tiers, even ad-free plans.  Demand will be supported by consumers having a cheaper option in its lower-cost ad-supported tier. 
• Partnerships with Hasbro and Mattel to license KPop Demon Hunters products should provide a revenue stream beyond subscriptions and advertising.
• New Amazon DSP partnership should help scale its ad business by providing easier access to a large pool of advertisers through a major ad-tech platform. Netflix’s ad-supported streaming inventory available through the Amazon DSP starting in Q4 2025, allowing advertisers to buy Netflix ads programmatically using Amazon’s tools and data, simplifying media buying and potentially improving ad targeting. 
• Netflix targets doubling revenue and EBIT tripling by 2030 with a 40% operating margin. We think this can be achieved via increased monetization driven by higher pricing and ads (which NFLX aims to hit $9b in revenue or 11.5% of 2030 rev.)
• AI could help trim content costs, enhance personalization and deepen engagement. But the rise of OpenAI’s Sora and text-to-video creation may eat into Netflix’s market share.
• Strong 2026 content slate including “Bridgerton,” “The Gentlemen” and “Narnia: The Magician’s Nephew.” 
• A sequel to K-Pop Demon Hunters is officially in development with a projected release year of 2029, likely further driving Netflix towards its FY30 targets.

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