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Netflix flirts with all-time highs as investors cheer ad momentum, foray into live sports

Netflix (NFLX) is closing in on the all-time high it set in November 2021 as investors applaud the company's foray into sports and its ad-supported tier continues to gain traction.

Netflix recently won the streaming rights to two NFL games set to air Christmas Day as part of a three-season deal. The company also told advertisers at its May upfront presentation that its ad tier has reached 40 million global monthly active users — a significant jump from the 15 million users the company revealed back in November and a 35-million-user increase compared to the year-ago period.

The growth comes as the streamer has raised the prices of its ad-free subscriptions in an attempt to lure more users to its ad-supported offering. Netflix's password-sharing crackdown has also lifted top-line growth and increased the platform's overall subscriber base, with another 9 million-plus users added in the first quarter.

On Friday, shares were trading around $685. Shares closed at a record high of $691.69 on Nov. 17, 2021.

Netflix stock has risen about 40% year to date, but it hasn't been an entirely smooth trajectory upward. In April, Netflix said it would stop reporting subscriber figures at the start of next year, raising concerns about its long-term subscriber growth and sending shares tumbling.

Still, some Wall Street analysts have praised the company's recent moves to drive revenue growth, with Needham analyst Laura Martin reiterating her Buy rating and $700 price target in a new note published on Monday.

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Martin said she's bullish on the company's global scale and recent price hikes to its premium offerings, along with its ability to bundle with other services to lower churn, or customers canceling their subscription plans.

The analyst added she anticipates further revenue acceleration due to advertising, which should also expand margins. In the first quarter, Netflix reported operating margins of 28.1% and guided to full-year 2024 margins of 24% — up from 21% in 2023.

"NFLX represents a scaled, global, premium video platform with a well-known brand and a first-mover advantage," Martin said. "Margin expansion and rising free cash flow will be key upside value drivers in 2024 [and] in 2025."

The company has recently leaned on live events, like its successful Tom Brady roast, and expanded into live sports.

Prior to its agreement with the NFL for the Christmas Day games, the company announced a 10-year deal with TKO Group Holdings' WWE (TKO) that will bring WWE’s flagship program Raw, a live wrestling production, to the streaming service beginning in 2025.

Netflix will also host a live boxing event between Jake Paul and Mike Tyson in November after the match was postponed from its original date in July.

INGLEWOOD, CALIFORNIA - MAY 05: Rob Gronkowski (L) and Tom Brady (R) speak onstage during G.R.O.A.T The Greatest Roast Of All Time: Tom Brady for the Netflix is a Joke Festival at The Kia Forum on May 05, 2024 in Inglewood, California.  (Photo by Matt Winkelmeyer/Getty Images for Netflix)
Rob Gronkowski (L) and Tom Brady (R) speak onstage during G.R.O.A.T The Greatest Roast Of All Time: Tom Brady for the Netflix is a Joke Festival at The Kia Forum on May 5, 2024 in Inglewood, Calif. (Matt Winkelmeyer/Getty Images for Netflix) (Matt Winkelmeyer via Getty Images)

"Investors are generally positive about NFLX buying live sports rights as part of its $17B content budget, as they believe that high-quality exclusive sports content, such as WWE, the Tyson vs Paul fight, and the NFL, will drive more new subs and longer engagement lengths than new entertainment content," Martin said.

Earlier this week, the company announced Netflix House, an immersive experience that offers retail, dining, and live attractions based on its popular programming like "Bridgerton" and "Squid Game."

"They can do innovative things," Martin told Yahoo Finance of the announcement, describing it as "their version of a theme park."

"I think the return on capital for some of these things is unknown and unproven. But they're really innovative and I think that's interesting."

Netflix is closing in on the all-time highs it set in November 2021 (Courtesy: Getty Images)
Netflix is closing in on the all-time highs it set in November 2021 (Getty Images) (Wachiwit via Getty Images)

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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