Netflix shares rise 10% to record high as strong subscriber addition eases growth concerns

Netflix shares hit an all-time high on Friday, buoyed by investor optimism that its strong content lineup will help the streaming giant maintain buoyant subscriber growth despite a boost from its password-sharing crackdown.

The company, widely seen as the winner of Hollywood’s streaming wars, saw its shares rise nearly 10% and were poised to add more than $28 billion to its roughly $295 billion market value if the gains.

That topped quarterly subscriber addition estimates by more than 1 million and projected sequentially higher sign-ups for the last three months of the year when South Korean drama “Squid Game” returns.

The company’s profit and revenue also beat estimates, a positive sign for its efforts to shift investor focus away from subscriber growth amid what some analysts see as an inevitable slowdown in sign-ups after the success of its password-sharing curbs.

Netflix added 5.1 million users in the third quarter, down from 8.76 million added in the year-ago period.

“The third quarter saw a slowdown in subscriber growth that we expected, but Netflix has other opportunities to continue to improve its financial performance,” said Morningstar analyst Matthew Dolgin.

Part of the pressure includes price increases. After raising fees in Japan, the Middle East and Africa as well as parts of Europe in recent weeks, Netflix is ​​raising prices in Italy and Spain, and some analysts expect similar moves in the US next year.

“Netflix has not announced any price changes, although (it) indicates there is room to take the price with a strong tie-up,” Bernstein analysts said.

The ad-supported level also showed signs of progress as it accounted for more than 50% of sign-ups in countries where it was available in the third quarter, although Netflix does not expect advertising to be the primary growth driver until 2026.

At least 20 analysts raised their price targets on the stock following the results, bringing the average target to $760 from $706.38, according to data compiled by LSEG.

Shares of Netflix were trading at 30.40 times forward 12-month earnings estimates, compared with 18.50 for Walt Disney and 9.65 for Comcast.

So far this year, Netflix stock is up about 41.2%, Disney is up 6.9%, while Warner Bros Discovery is down about 31%.

Netflix is ​​betting on a strong line-up to attract subscribers, including the new “Knives Out” movie, the latest season of “Stranger Things” and live events including two National Football League games on Christmas Day.

“Peers in the legacy media space are losing money hand over fist, meaning Netflix can capitalize on content creation while others can’t commit as much capital,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.