Following Netflix Inc.’s (NASDAQ:NFLX) successful venture into advertising-supported subscriptions, investors are banking on the streaming giant’s expansion into live events and sports to propel its stock price to new heights. This move mirrors traditional TV models, and could potentially drive Netflix’s shares back to the record peaks seen in 2021.
Netflix’s entry into sports and live events represents another avenue for growth, leveraging its vast subscriber base and commanding pricing power for advertisements surrounding popular content. Eric Clark, portfolio manager at Accuvest Global Advisors, views this expansion as a significant growth catalyst, highlighting Netflix’s ability to control pricing with its large audience.
While shares experienced a slight decline of 0.5% on Thursday, the stock has surged by 33% year-to-date, buoyed by Netflix’s reassuring performance in mature markets and successful execution of its ad-supported plan. The crackdown on password sharing and the expansion of its ad-supported tier have contributed to a post-Covid rebound in subscribers, with 40 million monthly active users reported for the ad-supported plan, up from 5 million a year ago.
Netflix’s push into live events and sports is part of its broader strategy to diversify content offerings. Recent initiatives include broadcasting events like “The Roast of Tom Brady” and a boxing match between Jake Paul and Mike Tyson. Additionally, Netflix will air National Football League games and has secured exclusive rights to Raw and other programming from World Wrestling Entertainment.
The streaming landscape has seen increased investment in sports content, with competitors like Amazon.com Inc. and Walt Disney Co. also making significant moves in this space. Wall Street analysts, including those at JPMorgan Chase & Co., anticipate strong viewership for Netflix’s upcoming boxing match, projecting increased advertising revenue as a result.
JPMorgan’s Doug Anmuth believes Netflix’s diverse content offerings position it as the “default choice” for viewers, driving continued growth. Analysts’ forecasts for the company’s earnings have seen upward revisions, indicating bullish sentiment among investors.
However, some caution is warranted, considering Netflix’s disappointing forecasts provided in April and its current valuation. At 32 times estimated earnings, the stock trades at a discount compared to its five-year average, but it has more than doubled from its 2022 low.
Despite these factors, senior portfolio manager Cotton Swindell remains optimistic about Netflix’s growth prospects, citing strong underlying growth to support its valuation. While immediate bumper growth from live events and sports may not materialize, Swindell sees ample reasons to be comfortable with Netflix as an investment choice.
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Author Faith Yakubu 
