Netflix pops on Q4 subscriber surge, analysts praise financials, content slate
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Netflix (NASDAQ:NFLX) shares surged more than 6% in premarket trading on Friday after the streaming giant reported fourth-quarter results that showed healthy gains in subscriber growth, led by a strong content slate, with analysts praising both the company's financial performance and its breath of offerings.
Goldman Sachs analyst Eric Sheridan, who has a sell rating on Netflix (NFLX), noted the positive tone on the earnings call as the company's content seemed to resonate better in the second-half, along with the roll-out of its ad-supported tier and password sharing restriction initiatives. 
"In terms of forward debates, the ability of [Netflix management] to execute on those initiatives and how they act as a catalytic path to return to double digit revenue growth coupled with upward margin trajectory and rising free cash flow generation will remain a key focus for investors," Sheridan wrote in a note to clients. 
"We agree that both of those options have the potential to either open up avenues of new subscriber growth and/or higher margin revenue dollars based on opening up or capitalizing on market opportunities." 
Shares of other media companies also rose in premarket trading, including Walt Disney (DIS), Paramount (PARA) (PARAA) and Comcast (CMCSA), among others.
KeyBanc Capital Markets analyst Justin Patterson, who has a sector weight rating on Netflix (NFLX), called the results "solid," adding that the free cash flow guidance of $3B was "better than expected" and likely one of the key drivers for investors.
However, with the stock having gained more than 45% over the past six months, its P/E is now back to levels not seen since early last year, which suggests less room for multiple expansion going into unknowns such as the increased crackdown on password sharing, Patterson added.
Guggenheim Partners analyst Michael Morris said the 7.7M subscriber addition in the fourth-quarter was "substantial" and with revenue and operating profit ahead of consensus, the company is operating well, notable in light of the fact that Reed Hastings is stepping down as co-CEO to become Executive Chairman, with Greg Peters taking his place. 
"We see Peters as offering complementary skill set to incumbent co-CEO Ted Sarandos," Morris wrote in a note to clients. 
Wolfe Research analyst Peter Supino boosted his per-share price target to $417 on Netflix (NFLX) following the results, noting it "reinforced our confidence in the subscriber outlook & operating leverage opportunity."
Supino expects the company will add at least 20M subscribers this year, well above the 13.5M consensus due to the company's advertising tier, as well as the paid sharing rollout, set to start this quarter and the company's outlook for "modest positive net adds" in the first-quarter, followed by higher additions in the second.
In addition to the quarterly update, Netflix (NFLX) said it would resume share buybacks in 2023.