Although the past few years have been tumultuous for Netflix (NFLX 2.58%), the company finally seems to have turned things around. Shares of the streaming giant are up by 41% over the trailing 12-month period. Further, Netflix's most recent quarterly update was well-received by investors as the company continues to showcase steady progress.
Can Netflix's momentum last? Or is the company doomed to experience another sell-off? Let's determine whether it is worth buying the company's shares today.
Netflix's strong third-quarter results
Netflix has implemented several changes over the past year or so. The goal was to strengthen the company's position in the increasingly competitive streaming landscape while boosting its financial results. These initiatives included a lower-priced ad-supported subscription option for price-sensitive customers.
Netflix also decided to crack down on viewers who enjoyed its service but weren't paying for it. Those accessing the platform by borrowing the passwords of paid subscribers they don't live with were taking a bite out of Netflix's revenue. The company started charging primary account holders for each sub-account. By the looks of it, Netflix's initiatives are paying off, and that's what we saw during the company's third-quarter update.
Netflix's revenue increased 7.8% year over year to $8.5 billion, while its paying subscribers came in at 247.15 million, 10.8% higher than the year-ago period. Netflix added 8.76 million subscribers in the quarter, an increase of 263.5% year over year. That is the highest number of net additions Netflix has recorded since the second quarter of 2020.
The company's earnings per share of 3.73 jumped by 20.3% year over year. Overall, Netflix's results were solid, and that could continue in the fourth quarter. The company expects revenue growth of 10.7% year over year, which is higher than anything it has reported in over a year.
NFLX Revenue (Quarterly YoY Growth) data by YCharts
There is still a long runway for growth
Netflix made an important announcement during its latest update. The company will be increasing the prices of some of its plans in the U.S., U.K., and France, three of its most crucial markets. Netflix has done this plenty of times before, and while there are always subscribers who decide to cancel the service as a result, the company always ends up keeping most of its members, and attracting even more customers once the dust settles.
This speaks volumes about the power of Netflix's brand. The company's vast library of content continues to deliver. In the third quarter, it launched the first season of the live action version of the Japanese anime One Piece, which was a smashing success. One Piece was a hit in countries with very different tastes and cultures.
As CEO Ted Sarandos said about the first season: "It's so rare for an English show to be that popular in Japan and Korea, Brazil, and in the U.S. at the same time." Netflix's content strategy has been one of its major weapons for a while, and the more its ecosystem grows, the more data it has at its disposal to analyze viewer patterns and habits to steer its productions in the most productive and lucrative directions.
This should help increase engagement over the long run, and there is still plenty of whitespace on that front. In September, streaming accounted for just 37.5% of television viewing time in the U.S., with Netflix grabbing 7.8% of that total. The U.S. is one of the more penetrated streaming markets, so the rest of the world's opportunity remains massive. That's why Netflix should be able to deliver growing subscribers, revenue, and earnings for a while.
The company's stock remains a buy even after its recent rally.
