Netflix in Focus After Strong Q4 Earnings With Huge Short-Term Upside

Netflix Inc. NFLX reported strong fourth-quarter 2025 earnings results driven primarily by membership growth, increased advertisement revenues and solid operational performance. The company’s global streaming platform spans across 190+ countries.NFLX surpassed the 325 million paid memberships milestone during the fourth quarter of 2025. Membership dynamics showed signs of reacceleration as engagement strengthened. Branded original content viewership increased 9% in the second half of 2025, while total viewing hours increased 2% annually.Robust Ad Revenues and Operational EfficiencyNetflix made great progress growing advertising revenues in 2025. Ad revenues grew more than 2.5 times year over year in 2025 to more than $1.5 billion. Despite facing strong competition from The Walt Disney Co. DIS and Amazon.com Inc.’s AMZN Prime Video, the company continued to enhance its advertising technology capabilities. In 2025, NFLX began testing new artificial intelligence (AI) tools to help advertisers create custom ads based on its intellectual property, with plans to build on this progress in 2026. The company also introduced automated workflows for ad concepts and used advanced AI models to streamline campaign planning, significantly speeding up these processes.NFLX delivered robust operational performance in the fourth quarter. Operating income reached $2.96 billion, up 30% year over year, with operating margin expanding two percentage points to 24.5%.Netflix had cash and cash equivalents of $9.03 billion as of Dec. 31, 2025. The company reported non-GAAP free cash flow of $1.87 billion in the fourth quarter compared with $1.38 billion in the prior-year period.Solid GuidanceFor the first quarter of 2026, Netflix expects revenues of $12.16 billion, indicating growth of 15.3% year over year. The company projects a first-quarter operating margin of 32.1%. For full-year 2026, NFLX forecasts revenues of $50.7 billion to $51.7 billion. This suggests 12% to 14% year-over-year growth driven by increases in membership and pricing, along with a rough doubling of ad revenues in 2026 from 2025. The company is targeting a 2026 operating margin of 31.5%, up from 29.5% in 2025.Strong Estimate Revisions The Zacks Consensus Estimate for current-year and next-year revenues is now projected to grow 13.2% and 11.5%, respectively. The Zacks Consensus Estimate for current year and next year EPS is currently projected to grow at 24.1% and 20.3%, respectively. The current Zacks Consensus Estimate for long-term (3-5 years) EPS growth rate is 18%, higher than the S&P 500’s growth rate of 15.8%.Huge Short-Term Price UpsideNetflix is currently trading at a massive 55.7% discount to its 52-week high price level. The short-term average price target of brokerage firms for the stock represents an increase of 36.2% from the last closing price of $117.29. The brokerage target price is currently in the range of $92-$150. This indicates a maximum upside of 74.2% and a downside of 6.8%.The chart below shows the price performance of NFLX in the past month.Image Source: Zacks Investment ResearchInvestment ThesisCurrently, Netflix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company’s proposed acquisition of Warner Bros. Discovery Inc. WBD for a consideration of $82.7 billion could be a game-changer if materialized. At this stage, it will be prudent to buy NFLX on every dip. Hold this stock for the long term as its extensive AI thrust and robust projections are likely to generate more value. Image Source: Zacks Investment ResearchZacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report The Walt Disney Company (DIS): Free Stock Analysis Report Warner Bros. Discovery, Inc. (WBD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks