Netflix(US:NFLX) ZACKSยท2025-09-08 17:15Core Insights - Netflix is expanding its advertising revenues to diversify income and enhance business resilience, aiming to double ad revenues in 2025 after achieving this in 2024, driven by the adoption of its ad-supported tier with 94 million monthly active users, representing over 55% of new sign-ups in available markets [1][3] Advertising Strategy - The company's advertising strategy focuses on increasing ad-tier penetration, utilizing advanced ad technology, and leveraging premium content, including the global rollout of its Netflix Ads Suite and integration with Yahoo DSP for improved targeting and measurement [2] - Live programming events like WWE Raw and NFL games are attracting advertisers seeking premium environments [2] Revenue Growth and Guidance - Ad revenue growth is strong and profitable, allowing Netflix to boost margins while keeping competitive pricing, with users engaging for an average of 41 hours per month [3] - Management has raised its full-year 2025 revenue guidance to $44.8-$45.2 billion, indicating a 15-16% year-over-year increase primarily driven by advertising gains [3] Competitive Landscape - Amazon's Prime Video is a significant competitor, with 80% of U.S. users on its ad tier, contributing to $15.6 billion in ad revenues for Q2 2025, up 23% year-over-year [5] - Disney+ is leveraging its iconic franchises and bundling with Hulu and ESPN+ to enhance its ad-supported tier, pushing users towards cheaper options and increasing adoption [6] Stock Performance and Valuation - Netflix shares have gained 39.5% year-to-date, outperforming the Zacks Broadcast Radio and Television industry, which returned 30.8% [7] - The stock appears overvalued with a forward price-to-sales ratio of 10.79 compared to the industry average of 4.95 [10] - The Zacks Consensus Estimate for Netflix's 2025 revenues is $45.03 billion, reflecting a 15.47% year-over-year growth, with earnings estimated at $26.06 per share, indicating a 31.42% increase from the previous year [13]