BMO raises Netflix shares target by 12%

  • Investing.com
BMO raises Netflix shares target by 12%

On Wednesday, BMO Capital Markets expressed confidence in Netflix (NASDAQ: NFLX )'s growth prospects, raising its price target on the streaming giant's shares to $713 from the previous $638. The firm has reiterated its Outperform rating for Netflix, citing several factors that could drive the company's future growth.

The optimism from BMO Capital stems from potential member growth starting in 2024, propelled by strategies such as paid sharing initiatives, a partnership with T-Mobile (NASDAQ: TMUS ), and content expansion, including live sports broadcasting beginning in the third quarter of 2024.

Additionally, the analyst highlighted the expected shift of $20 billion from the $150 billion-plus global linear TV market to connected TV and online platforms over the next three years, which includes an $8 billion transition within the United States.

BMO Capital also noted the introduction of new advertising formats on Netflix's platform. The firm's revised model anticipates that by 2024, there will be approximately five advertising impressions per hour per member, which is expected to increase to 7.6 by the end of 2025.

According to these projections, advertising revenues are set to comprise about 10% of Netflix's total revenue in the fourth quarter of 2025, with further growth anticipated beyond that period.

The updated price target reflects the anticipated positive impact of these developments on Netflix's financial performance. The company's strategic moves to diversify revenue streams and adapt to changing market dynamics appear to be key drivers of the positive outlook from BMO Capital.

InvestingPro Insights

Recent data from InvestingPro underscores the high valuation multiples at which Netflix is trading, reflecting a market expectation of continued growth and profitability. With a current P/E ratio at 50.59 and a Price/Book ratio of 12.98, investors are pricing Netflix with optimism for its future earnings. This is supported by the company's robust revenue growth, with the last twelve months as of Q4 2023 showing a 6.67% increase, and a substantial 12.49% quarterly revenue growth in Q4 2023. Furthermore, Netflix's gross profit margin stands at a healthy 41.54%, indicating that the company is not only increasing its top line but is also effectively managing its cost of goods sold.

InvestingPro Tips highlight Netflix as a prominent player in the Entertainment industry, with a high return over the last year, and analysts' predictions that the company will remain profitable this year. These insights are particularly relevant as they align with BMO Capital Markets' assessment of Netflix's growth prospects. The company's strategic initiatives, such as content expansion and new advertising formats, are poised to capitalize on the shift from traditional TV to connected and online platforms. Additionally, with over 15 additional tips available on InvestingPro, users can leverage these insights to make more informed investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for deeper analysis and more comprehensive tips.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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