Netflix stock: earnings results and WWE rights acquisition look promising to me

Oliver Rodzianko takes a look at Netflix stock and yesterday’s earnings results. He also touches on its WWE rights acquisition and gaming plans.

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There’s some big news surrounding Netflix (NYSE:NFLX) stock, including its acquisition of major WWE rights, part of its ongoing plan to expand its entertainment suite. It has also pivoted into gaming recently and has partnered with leading industry veterans to bring top-class content to the field.

But before I get on to that, here’s a fresh look at the company’s Q4 2023 earnings results, released last night.

Earnings update

Netflix’s earnings per share for Q4 this year were $2.11, a little below the consensus expectations of $2.20.

However, the company reported a nice 12.5% increase in revenue against the previous year’s quarter. It also added 13m subscribers.

Staggeringly, it also reported a net income of $938m, a massive increase from $55m a year ago.

Co-founder and co-CEO Reed Hastings also stepped down from his role. He will now serve as Netflix’s executive chairman. To replace him, COO Greg Peters will join current co-CEO Ted Sarandos in the position.

Based on these earnings results, I think the company is going to have a great year ahead. It’s got some nice expansions under way, and with the financial growth to go with it, it’s hard to complain.

A closer look at WWE and gaming

The company reached an agreement to stream WWE’s weekly TV show, Raw, live across various countries beginning in January 2025.

The move signifies the company’s expansion into live broadcasting. A key part of the deal is that Netflix will become the home for all WWE shows, specials, documentaries, original series, and upcoming projects.

Netflix is also getting into gaming. It started its video-game operations with interactive content on its streaming platform. Now, it has hired the likes of Mike Verdu, a former executive from Meta‘s Oculus and EA.

Less than 1% of Netflix subscribers regularly engage with its games as of August; therefore, the company is attempting to grow this. It has acquired multiple gaming studios and opened its own in Helsinki and California to bolster the effort.

Valuation and other risks

The current results look promising. Yet, the market may have overvalued the stock as a consequence. It has a price-to-earnings ratio based on future estimates of around 32.

Therefore, there is little room for error in the firm’s results to justify the current price.

Also, the company could face significant issues with its video game strategy if more established studios prove more popular. Competition in the industry is fierce, and gamers are often loyal to specific studios’ work. Breaking into the advanced games market is no mean feat.

Takeaway

Overall, Netflix is on a bull run in my opinion. The firm is expecting double-digit growth for the full year 2024.

I was apprehensive of the stock a couple of weeks ago, but less so after the recent news and earnings.

Even though there are risks in its new strategies, and the valuation is a concern to contend with, the shares are a buy to me. I’ll likely add it to my portfolio soon when I have some spare cash to invest.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Oliver Rodzianko has no position in any of the shares mentioned. The Motley Fool UK has recommended Electronic Arts and Meta Platforms. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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