Netflix is currently receiving price targets of $750 or higher from the likes of J.P. Morgan, Jefferies and Morgan Stanley. The company has routinely exceeded expectations, said Third Bridge’s Jamie Lumley, who noted its operating margin rose by 28% last quarter.

“It’s the best in class,” Lumley said. “It’s really just knocking out of the park a lot of these metrics.”  

The stock was trading around the $640 mark midday Thursday, down almost 6% for the week, but shares are up over 40% in the past year.

Does Netflix have room after password-sharing crackdown?

For Netflix, the summer months tend to be relatively soft. During its last earnings call in April, Netflix forecast a decline in new subscribers and a fall in diluted earnings per share from $5.28 to $4.68. Still, the company predicted revenue growth of 16% for the quarter, which equated to 21% growth when adjusted for foreign exchange factors. Those projections may be conservative, analysts at J.P. Morgan said in a note last week.

Barring results that are exceedingly positive (or negative), however, Lumley said a huge movement in the stock is unlikely. Netflix may be a victim of its own success, he said, after several excellent quarters.

“It is hard to continue to deliver on that,” he said.

Some key growth drivers might also be losing steam, including the company’s highly successful crackdown on password sharing. Out of an estimated 100 million households who were sharing logins to watch shows like Bridgerton and Stranger Things before “paid sharing” was introduced last year, Netflix expected to covert about half of those users into new subscribers, Lumley said. As of last quarter, Netflix had added 37 million new subscriptions in the past year, raising questions about how long the move will buoy the company’s top line.

Analysts are watching if the service’s cheaper ad-supported tier, which had amassed 40 million users as of May, can fill the potential void. A recent note from Bloomberg Intelligence estimated Netflix’s total advertising revenue could reach $2 billion by the end of 2024 and double in 2025.

Then there’s the company’s move into live sports, punctuated by a deal with the NFL to air two live games on Christmas Day and a 10-year, $5 billion agreement with World Wrestling Entertainment, or WWE, the pro wrestling behemoth cofounded by Vince McMahon.

Lumley said the big spending is an attempt to find properties that can keep viewers engaged after they’ve finished binging their favorite show. An ability to invest in an industry-leading content library is helpful, too.

“[Netflix is] trying to appeal to the widest audience possible," Lumley said. "Not all the other players can do that.”

Customer satisfaction remains critical as Netflix stops releasing subscriber numbers

Meanwhile, Netflix is changing the way it communicates data about customer satisfaction to investors. In its last earnings call, the company announced it would stop reporting subscriber numbers starting in 2025. Now that the company generates substantial profit and free cash flow, Netflix said, its primary financial metrics and engagement numbers were more relevant indicators of consumer attitudes.

Lumley said the company's decision may have been based on a desire to tone down knee-jerk investor reactions to subscriber growth and better showcase its fundamental operating numbers.  

“So much focus on one metric can kind of detract from the other growth drivers that Netflix has going for it,” he said.

Whatever the case, Lumley said customer surveys indicate Netflix’s reputation in a fiercely competitive industry is strong, even when consumers are looking to cut back on entertainment spending.  

“Netflix tends to be one of the streaming platforms they hold on to,” he said.