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3 Stocks Set to Benefit From Netflix’s Earnings Success

Published 01/25/2024, 01:46 AM
Updated 04/07/2022, 04:55 AM

Netflix (NASDAQ:NFLX) significantly expands its customer base. Which services can follow up that demand?

On Tuesday, Netflix reported its Q4 earnings. The streaming giant added 13.12 million subscriptions for 2023, beating its estimate of 9 million.

Netflix’s revenue of $8.83 billion also beat Wall Street’s estimate of $8.71 billion, representing 12.5% year-over-year growth. For the next quarter’s revenue, the company expects $9.24 billion against the similar Wall Street consensus of $9.28 billion.

NFLX is up 18.7% year-to-date and has seen a significant uptick after reporting its latest quarter. Given this surprise subscriber growth, which stocks could benefit from streaming intake?

1. Comcast

The global telecom company powers much of online infrastructure, having a 70% market share against its competitors as of Q3 2023. Comcast (NASDAQ:CMCSA) reported 19.1% greater free cash flow in Q3 ‘23 than in a year-ago quarter, spread across broadband, video, voice, wireless, and theme parks.

The company has a long-standing partnership with Netflix. In 2016, Comcast onboarded Netflix on its own X1 platform, which serves as an operating hub that integrates TV and internet services. In 2018, Comcast further boosted Netflix with the feature to add Netflix subscriptions in Xfinity packages.

Although CMCSA is not a high-growth stock like NFLX, Comcast has a strong dividend payout history, having increased annual payouts since 2008. Presently, CMCSA dividend yield is 2.64% at annual dividend payout of $1.16 per share.

Based on 27 analyst inputs pulled by Nasdaq, CMCSA is a “strong buy.” The average CMCSA price target is $50.19 vs the current $44. The high estimate is $58, while the low forecast is close to the present range at $43 per share.

2. DigitalOcean

This cloud computing platform caters to small to medium-sized businesses, including startups. Owing to competitive pricing, DigitalOcean (NYSE:DOCN) makes them a compelling choice for data storage, virtual machines, and managed Kubernetes service (DOKS).

In effect, DigitalOcean services can be used to provide a Smart DNS Proxy solution to unlock Netflix from geo-restrictions. In the latest Q3 earnings report, DigitalOcean tracked 16% year-over-year revenue growth to $177 million, with a free cash flow of $127 million.

The company’s net income margin of 11%, as revenue is converted to income, is above the heavyweights like AWS. Over the last three months, DOCN stock outpaced NFLX, with gains of 57% and 36%, respectively.

Based on 12 analyst inputs pulled by Nasdaq, DOCN stock is a “buy. ” The average DOCN price target is $35.44 vs. the current $34. The high estimate is $47, while the low forecast is $25.

3. Roku

Founded in 2008 as a Netflix device spin-off, Roku (NASDAQ:ROKU) has become the top media player for hosting Netflix and distributing its content. In Q3 2023 earnings, Roku reported 75.8 million active users, nearly doubling since 2020.

In hours watched using Roku devices, this translates to global 26.7 billion hours in Q3. On average, this is 3.9 streaming hours per account, representing 5% year-over-year growth.

Roku’s revenue grew 20% YoY to $912 million for the quarter, achieving 22% YoY gross profit excluding restructuring costs. For Q4, the company expects $405 million in total gross profit and a revenue boost to $955 million.

In the last three months, ROKU stock also outpaced NFLX at 47% vs 36% gains respectively. Based on 26 analyst inputs pulled by Nasdaq, ROKU stock is a “buy.” The average ROKU price target is $89.67 vs. the current price of $90.97. The high estimate is $120, while the low forecast is $65 per share.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

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