Wedbush maintains an optimistic stance on Netflix (NFLX) following the company’s strategic rollout of advertising-supported tiers, citing improved monetization potential and subscriber retention. The move marks a pivotal shift in Netflix’s revenue model amid evolving streaming competition.
- Ad-tier subscriptions exceed 20 million globally as of Q4 2025.
- Ad revenue reached $820 million in Q4 2025, up 14% YoY.
- 3.2 million net new subscribers added in Q4, with half from ad-supported plans.
- Ad pricing at $15–$20 CPM, driving higher incremental margins.
- Wedbush maintains an outperform rating on NFLX based on ad strategy momentum.
- Netflix’s forward P/E reflects improved valuation sustainability.
Netflix (NFLX) continues to strengthen investor confidence through its accelerated push into advertising, a strategy now backed by Wedbush Securities. The firm reiterated its outperform rating on the stock, highlighting that the ad-supported subscription tier is becoming a key driver of revenue diversification and long-term scalability. The company’s ad-tier subscriptions now exceed 20 million globally, a significant increase from just 10 million in early 2024. This growth has led to a 14% year-over-year rise in ad revenue, contributing $820 million in the fourth quarter of 2025. These figures underscore the platform’s ability to attract cost-conscious viewers while expanding its monetization avenues beyond traditional subscription fees. The strategic pivot is particularly impactful in mature markets like the U.S. and Western Europe, where subscriber growth has plateaued. By offering a lower-priced, ad-supported option, Netflix has stabilized churn rates and added 3.2 million net new subscribers in Q4—nearly half of which joined the ad-tier plan. This model not only enhances customer acquisition but also supports profitability as ad sales scale. Market participants, including institutional investors and equity analysts, are viewing the ad strategy as a catalyst for margin improvement. With ad inventory pricing now at $15–$20 CPM (cost per thousand impressions), Netflix is achieving higher incremental margins on ad revenue compared to content licensing costs. The shift is reshaping investor expectations, with NFLX’s forward P/E ratio now reflecting a more sustainable valuation relative to peers in the consumer discretionary sector.