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Netflix shares hit an all-time high as investors ignored the subscriber decline

Netflix shares hit an all-time high as investors ignored the subscriber decline

Netflix shares hit an all-time high on Friday, buoyed by investor confidence that its robust content offering will help the streaming giant maintain positive subscriber growth even as the boost from its crackdown on password sharing fades.

The company, widely seen as the winner of Hollywood’s streaming wars, saw its shares rise nearly 10% to $754.90 and is expected to add more than $28 billion to its market value of about $295 billion , if the gains continue.

It beat estimates for quarterly subscriber growth by more than 1 million and predicted sequentially higher sign-ups for the final three months of the year, when South Korean drama “Squid Game” returns.

Netflix predicted sequentially higher sign-ups for the final three months of the year, when South Korean drama “Squid Game” returns. AP

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

The 5.1 million users Netflix added in the third quarter were below the 8.76 million additions in the same period last year.

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

Part of the push includes price increases. After raising fees in Japan, the Middle East and Africa and parts of Europe in recent weeks, Netflix is ​​raising prices in Italy and Spain, and some analysts expect a similar move in the U.S. next year.

“Netflix did not announce a price change, but indicated there is room for price increases with greater engagement,” Bernstein analysts said.

The company’s profit and sales also exceeded estimates. Above: Lily Collins in “Emily in Paris.” GIULIA PARMIGIANI/NETFLIX

The ad-supported tier also showed signs of progress, accounting for more than 50% of signups in the countries where it was available in the third quarter, although Netflix doesn’t expect advertising to become the primary growth driver until 2026.

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

Shares of Netflix traded at 30.40 times 12-month earnings estimates, compared to 18.50 for Walt Disney and 9.65 for Comcast.

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

There have also been signs of progress in the ad-supported space, but Netflix doesn’t expect advertising to become the primary growth driver until 2026. Ashish Vaishnav/SOPA Images/Shutterstock

Netflix is ​​banking on strong programming, including the new movie “Knives Out,” the latest season of “Stranger Things” and live events, including two National Football League games on Christmas Day, to lure subscribers.

“Competitors in the traditional media space are losing money massively, which means Netflix can increase its lead in content creation while others can’t bear to commit more capital,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.