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Netflix stock forecast: Q3 exceeds expectations

By Rob Griffin

Edited by Jekaterina Drozdovica


Updated

Big Netflix logo on a TV in a dark room with red lights in the background — (Photo: WeDesing / Shutterstock.com)
When will the streaming giant recover? – Photo: WeDesing / Shutterstock.com

It’s been a difficult year for the US-based streaming giant Netflix (NFLX), but the most recent earnings report has seen the company exceed some expectations, particularly in revenue, operating income and membership figures.

However, the company has so far this year seen the stock price fall nearly 50% in what appears to be an appalling year across the board.

A combination of intense competition, rising inflation, recession fears, and stock market antipathy towards growth stocks has been largely to blame.

But the company’s management believes its growth plans, which include a shake-up of its pricing structure, can result in growing revenue and subscriber numbers. Here we take a look at the company’s fundamentals, share price performance, analysts’ expectations and other factors shaping Netflix stock forecast.

What is Netflix? 

Netflix, which is based in Los Gatos, California, is a leading name in streaming-on-demand services, with more than 200 million subscribers in 190 different countries. Members can access TV series, documentaries, feature films and mobile games at any time, on any internet-connected device.

Netflix was created in 1997 when Reed Hastings and Marc Randolph had the idea of renting DVDs by mail. Netflix.com, the first DVD rental and sales site, launched in 1998. A subscription service began the following year, offering benefits to members.

In 2002, the company went public in an initial public offering (IPO) on the Nasdaq stock exchange at a selling price of $1 a share under the ticker NFLX. Just four years later its membership hit five million.

Netflix has developed streaming services, made its own original programmes and expanded around the world. As of September 2022, Netflix’s market capitalisation amounted to more than $100bn, making it the third largest entertainment company behind Walt Disney (DIS) and Comcast (CMCSA). 

Netflix stock price history

Over the past five years, the NFLX stock price has risen by 49% to $298.62 as of 27 October 2022. Over the longer term, the stock has put in an impressive performance, achieving trailing returns of 34% over the past 10 years, according to Morningstar – more than four times the industry average of 10%.

However, Netflix shareholders have certainly experienced highs and lows over the past year, due to company-specific factors and the stock market’s lacklustre view of technology companies.

It was all looking good for the company on 17 November 2021 as the stock hit its all-time high closing price of $691.69. The share price then fell by 13.6% to $597.37 by the start of 2022.

Netflix has found 2022 far more challenging. Its stock has fallen 50% from the beginning of January to $298.62 at the time of writing. Such factors need to be considered when establishing a realistic NFLX stock forecast.

Netflix 5-year price history

Subscriber numbers and Q3 earnings report

Revenue in the third quarter grew 6% year over year, driven in Q3 by a 4.5% increase in average paid memberships and a 1% rise in average revenue per membership (ARM).

Excluding the impact of foreign exchange, revenue and ARM grew 13% and 8% year over year, respectively. The sequential decline in revenue was entirely due to foreign exchange. Netflix had initially under-forecasted paid net additions, which totalled 2.4 million compared with the 1 million forecast last quarter.

In a note to shareholders, the company wrote: “After a challenging first half, we believe we’re on a path to reaccelerate growth. The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us.”

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Partnership with Ubisoft and other news 

Netflix announced in September that it was partnering with Ubisoft to create three exclusive mobile games for members from 2023. 

The games will expand on the Valiant Hearts, Mighty Quest and Assassin’s Creed universes, and will be available exclusively on mobile to Netflix members with no ads or in-app purchases. 

Mike Verdu, vice-president of games at Netflix, said the company was thrilled to work with Ubisoft, which had an “unmatched” track record of creating memorable worlds for fans, noting:

“This partnership will provide our members with exclusive access to some of the most exciting game franchises as we continue to build a catalogue of great mobile games for our members around the world.”

In other news, earlier this year Netflix announced plans to combat the widespread account sharing between households, which it insisted undermined its ability to invest in its service. In another move to bolster revenue, the company has announced it is introducing an advertising-based subscription to the platform:

Our lower-priced ad-supported plan launches in 12 countries in November – just six months after our initial announcement. Our existing plans remain ad-free.

Netflix also announced that Microsoft had been selected as its global advertising technology and sales partners.

“It’s very early days and we have much to work through…But our long-term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers.”

Netflix stock forecast: What do the analysts think?

So, what are the Netflix stock predictions from analysts? Danni Hewson, financial analyst at AJ Bell, told Capital.com it is easy to view Netflix with short-term blinkers on and see that it’s going through some painful changes. She believed that in the longer term, the introduction of ad-supported content could deliver more viewers and more cash:

“Sure, some current subscribers will downgrade but Netflix has so much valuable information about the viewing habits of its users that its new chapter really shouldn’t miss… It can tailor content and the timing and frequency of when that content is delivered to create maximum impact.”

Hewson also highlighted the company’s burgeoning international market that advertisers will be “salivating to get their products out to” over the coming years: 

“If it’s smart, and there’s every indication it will be, Netflix part 2 could be as much of a blockbuster as its predecessor.”

However Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, sounded a note of caution: 

“Netflix’s challenge is that its competitive edge is becoming dulled. Rivals are closing the gap on content quality. The payment reductions offered for the ad-supported version arguably don’t represent good market value either when compared to rival offerings, especially the Disney+ and Hulu bundle. The business risks seeing its more lucrative customers, who pay for higher resolutions and offline streaming, slide down into a cheaper plan. That means Netflix risks sacrificing margin in the name of stopping subscriber outflows, rather than replenishing the top of the funnel with new ones.”

NFLX stock price targets for 2022 and beyond

The NFLX stock price forecast has maintained a ‘hold’ rating, based on the views of 40 analysts compiled by MarketBeat, as of 27 October, with their consensus being that NFLX stock price could rise to $306.55 in the next 12 months.

The most optimistic Netflix stock forecast for 2022 pencilled in an increase to $700, while the lowest suggested a 32% fall to about $160. 

However, other observers weren’t quite so upbeat. An analysis of 31 Wall Street analysts compiled by TipRanks, as of 27 October, revealed their average Netflix share price forecast target was $284.20. The highest prediction came in at $375, while the lowest stood at $162. 

Meanwhile, according to the algorithmic forecasts of Wallet Investor as of 27 October, the Netflix stock forecast for 2025 saw the price hit $321 in October 2025. 

Note that analyst and algorithm-based predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. 

Always conduct your own due diligence before trading, looking at the latest news, a wide range of analyst commentary, technical and fundamental analysis on the stock. Keep in mind that past performance does not guarantee future returns. And never trade money that you cannot afford to lose. 

FAQs

Is Netflix a good stock to buy?

Whether NFLX stock is a good investment for you will depend on your own investment objectives and the research you have carried out on the stock. Remember, it’s very important to form your own opinion of a company’s prospects and its likelihood of achieving analysts’ targets.

Keep in mind that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.

Will Netflix stock go up?

The consensus forecast from analysts, compiled by MarketBeat, is that NFLX stock could rise to $306.55 in the next 12 months. The most optimistic Netflix stock forecast 2022 pencilled in an increase to $700, while the lowest suggested a fall to about $160. It’s important to remember that forecasts can be wrong. You need to carry out your own analysis of the stock and make up your own mind up about its prospects.

Should I invest in Netflix stock?

This depends on your view of the company. Analysts believe the industry is likely to grow – but warn it’s already fiercely competitive. You will need to draw your own conclusions on how NFLX stock price is likely to perform over the coming years.

Keep in mind that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.

Markets in this article

NFLX
Netflix Inc (Extended Hours)
619.05 USD
19.25 +3.210%
CMCSA
Comcast
42.18 USD
-0.67 -1.570%
DIS
Walt Disney Co (Extended Hours)
113.06 USD
1.33 +1.190%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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