Netflix stock reaches all time high after Squid Game success

Netflix Inc (NASDAQ: NFLX) stock has reached an all time high this week after “Squid Game”, a Korean TV show has taken the world by storm. The Netflix thriller is poised to become Netflix’s biggest non-English-language show in the world according to Netflix’s CEO Ted Sarandos. Currently, Squid Games holds the title for #1 TV Show in 90 different countries, highlighting its immense popularity internationally. The success of Squid Games has reinforced Netflix’s authority in both the US and international markets. Here’s what you need to know about Netflix stock.

Wallstreet analyst boosts Netflix stock target after Squid Game success

Wallstreet analyst, Michael Morris from Guggenheim recently raised the firm’s price target on Netflix to $685 a share. Morris noted that the global hit TV series Squid Game is a prime example of Netflix’s unique value proposition that the company offers its customers on an international scale.

The analyst noted that “developing a sustainable global asset base should further strengthen its content development leadership position” according to theFly report. The analyst expects Netflix’s global asset base to drive member growth and pricing power, which will overall benefit the company and shareholders. Guggenheim’s valuation currently implies an upside of 8% on Netflix stock.

Another Wallstreet analyst that has praised the success of the South Korean series is KeyBanc’s Justin Patterson. Patterson notes that Squid Game is on pace to be Netflix’s most popular original ever. Squid Games global popularity has driven improved app rankings in recent weeks across international markets.

The analyst believes Netflix’s success across genres and with non-English content “demonstrates that the company has more levers for content growth than its competitors”. The analyst has a price target of $645 a share, implying a slight upside on Netflix stock.

Netflix stock

Netflix users now exceed 200 Million globally

Netflix is one of the most popular online streaming entertainment service companies in the world. The company recently reported the total consumer base of 209 million subscribers globally after they added slightly more than a million subscribers in the second quarter of 2021.

However the growth in new subscribers fell below analyst’s expectations, as analysts predicted an increase of 5.5 million users on the platform. The projected growth for the next quarter is around 3.5 million new subscribers.

Looking forward, Atlantic Equities analyst Hamilton Faber sees Netflix netting 311 Million subscribers by 2025, representing an increase of 102 Million users over the next 4 years.

In-Depth Review of the Second Quarter Financials

The Second-quarter revenues went up 19% year over year to $7.34 billion. This number is slightly above the management’s guidance of $7.30 billion and Wall Street’s prediction of $7.32 billion.

If we talk about the earnings per share, they jumped to 90%, bringing the diluted share to $2.97. However, the guidance target pointed to $3.16 per share and the analysts were expecting it to be around $3.15. The operating profits were also below the target level while its 1.54 million net new subscribers exceeded the official goal of 1 million. 

In the Q2 statement, Netflix cited a study by Nielsen which found that Netflix represented 7% of consumer TV time in the United States. The company is confident they still have a long runway of growth catalysts to improve this percentage.

Netflix to target the gaming segment

Netflix is aiming to launch its gaming services on the platform. The Gaming segment on the platform will be a part of a member’s regular subscription. This means that there will be no extra fee for the gaming services and new members would have to pay only the subscription fee. 

The aim is to steal market share or TV consumption time away from consoles, as the company noted losing significant TV time to Fortnite in 2019.

The Bottom Line – Netflix stock benefits from Squid Game success

Overall, the Netflix series “Squid Game” has been an international success that has taken Netflix stock to all time highs. Both Wallstreet analysts Michael Morris and Justin Patterson have highlighted this success and benefits for Netflix stock in recent research notes.

The company plans to announce Q3 results on October 19, which will certainly highlight the impact of Squid Game on quarterly sales revenue.

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