Few companies will do better in 2024 than Netflix. The streaming giant's stock has nearly doubled in the last year, with investors stunned by impressive audience growth and profit margins that remain the envy of a fiercely competitive industry. Still, investors will be looking for assurances from top management that the momentum can continue into this year when the company reports fourth-quarter earnings after the bell on Tuesday.
High expectations have been baked into the stock price, with the company trading at 37 times earnings over the next 12 months, compared with 24 times for the S&P 500, according to S&P Cap IQ estimates. Netflix's figure is also higher than several companies. Its Silicon Valley neighbors include Alphabet, Microsoft, Apple, and even artificial intelligence darling Nvidia.
"Next week will be very important for us to confirm those good feelings," said Brian Mulberry, a client portfolio manager at Zacks Investment Management, which owns Netflix in several of its funds.
In October, the company's third-quarter earnings per share reached $5.40, beating Wall Street expectations by 30 cents and sending its stock price up 11%. The platform hopes to end the year with the return of hit series "Squid Game" and the broadcast of two NFL games over Christmas, underscoring the company's continued push into live sports. However, Mubury said the fourth quarter is typically a weak quarter for Netflix as viewers decide whether to renew their subscriptions in the new year and the company ramps up investment in new creative and programming.
This time, analysts surveyed by Visible Alpha expect earnings per share of $4.23, still double the same period last year, while revenue is expected to rise nearly 15% year-over-year to $10.1 billion. Mulberry said the stock could see volatility on Tuesday depending on whether management reiterates or upgrades its forecast for 2025. The company issued confident guidance in October, projecting revenue to grow 11-13% this year to $43-44 billion.
Netflix stock has risen 90% in 2024, far outpacing the S&P 500's already impressive 24% gain, but at the start of the year, Netflix stock has retreated about 3% and is currently trading around the $860 mark . The median analyst price target for the stock is $888, according to Cap IQ, which implies much less room for upside in the year ahead.
"This is not going to be the parabolic stock price rise that we've seen over the last 12 to 24 months," Mulberry said. "Things are becoming increasingly competitive. Investors like us want to see a return on investment."
This includes live sporting events, whose contracts are eye-poppingly expensive. Netflix reportedly spent $150 million to broadcast two Christmas NFL games this year CompetitorThat's about $50 million more than the production cost of one season of "Game of Thrones."
The company also spent heavily to broadcast a November boxing match between former superstar Mike Tyson and influencer Jake Paul, but the livestream was marred by severe buffering and freezing issues . NFL games are going well, but Mulberry said it's important for Netflix to continue executing.
Last quarter was also the last time Netflix said it would report subscriber growth figures. The statistic has been under intense scrutiny by analysts for years, but the company believes it detracts from other metrics it believes better reflect customer satisfaction and overall performance.
Mulberry, meanwhile, isn't too worried. Other types of sales estimates can be used to glean the same insights, he said.
This story originally appeared on Fortune.com