Netflix’s stock price has reached an all-time high, marking its sixth consecutive day of gains.
This surge in Netflix’s stock is attributed to the impressive growth of its advertising business, which has diversified its revenue streams, and the anticipation surrounding new content, such as the upcoming season of Squid Game.
According to financial sources, Netflix’s stock closed at $698.54 on the New York Stock Exchange on the 20th (local time), reflecting an increase of $10.01 (1.45%) from the previous day.
On July 18, Netflix reported its second-quarter results, revealing revenues of $9.56 billion and an operating profit of $2.6 billion. Compared to last year’s period, revenue and operating profit grew by 16.8% and 42.4%, respectively. Moreover, the company added 8.04 million new subscribers, exceeding market expectations.
Netflix’s stock has recently strengthened due to its strong financial performance and growing optimism about improving advertising profitability.
Amy Reinhardt, Netflix’s President of Advertising, announced on the company’s blog yesterday, “For Netflix’s second year of Upfront negotiations, we closed deals with all major holding companies as well as independent agencies, with a 150% plus increase in upfront ad sales commitments over 2023, in-line with our expectations.”
Netflix has also secured advertising partnerships for a range of content, including Squid Game Season 2, Wednesday, Outer Banks, Happy Gilmore 2, Ginny & Georgia, and Love Is Blind. The company has also partnered with WWE for RAW and will feature ads during live broadcasts of NFL games on Christmas.
Reinhardt noted that in recent months, Netflix has achieved significant milestones in its advertising business. She emphasized that by 2025, Netflix plans to launch its own advertising technology platform globally, which will introduce new sales methods and impact measurement tools for advertisers.
Following this news, Netflix’s stock price briefly surged to $711.33 during trading, setting a new all-time high.
Netflix is also working to strengthen its advertising business by transitioning its subscription tiers. After phasing out the $11.99 Basic plan in the UK and Canada, Netflix is now gradually eliminating it in the U.S. and France, encouraging subscribers to switch to its ad-supported plan.
According to Netflix, as of May, the number of monthly active users (MAUs) for the ad-supported plan in regions where it has been introduced reached 40 million. This is an eightfold increase from 5 million MAUs in the same period last year.
Lee Hyeon Ji, an analyst at Eugene Investment & Securities, predicted that while advertising will take time to drive Netflix’s revenue growth, the ad-supported plan’s subscriber base is expected to grow significantly by 2026. Lee anticipates that Netflix will attract major sponsors and start seeing meaningful contributions from advertising profits by then.
Daniel Morgan, an investment strategy manager at Synovus Trust, commented, “Investors are really embracing Netflix’s strategy.”
“The Netflix story used to be that it was spending a ton on content, having negative free cash flow, and that it would issue debt. It isn’t doing that anymore, and that’s made a huge difference. It is being rewarded for that consistency ahead of the pack here.”