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Netflix shares target raised, Overweight rating sustained on member trends

EditorNatashya Angelica
Published 2024/06/13, 18:46
© Reuters.

On Thursday, KeyBanc Capital Markets adjusted its outlook on Netflix Inc. (NASDAQ: NASDAQ:NFLX), increasing the stock's price target slightly from $705 to $707, while sustaining an Overweight rating. The firm's decision follows recent data suggesting positive shifts in the streaming giant's subscriber trends and user engagement levels.

KeyBanc's analysis, based on their latest Media Survey and Key First Look Data, anticipates that Netflix will see an uptick in new subscribers, estimating net additions of approximately 29 million in 2024, 23 million in 2025, and 18 million in 2026. These figures represent increases of 10%, 19%, and 8% above the current market expectations, respectively.

Despite recognizing the challenges posed by advertising Average Revenue per Member (ARM) dilution, KeyBanc forecasts that potential pricing strategies could lead to a 3-4% blended ARM increase. This adjustment is expected to contribute to revenue growth of 15% in 2024, 13% in 2025, and 11% in 2026.

The firm's analysis indicates confidence in Netflix's ability to balance out the dilutive effects of advertising on ARM with strategic price increases. KeyBanc's updated stock price target is based on a 30x multiple of Netflix's projected 2025 earnings per share. The Overweight rating remains unchanged, signaling the firm's optimistic stance on Netflix's stock performance in the coming years.

In other recent news, Magnite's earnings and revenue potential have been positively influenced by a recent partnership with Netflix. Evercore ISI has increased its revenue and EBITDA forecasts for Magnite for fiscal year 2025 by approximately 2% and 4%, respectively. This partnership is expected to significantly boost Magnite's connected TV (CTV) revenue, potentially adding an additional $10 to $30 million.

In parallel, Netflix has also been the focus of Evercore ISI's positive outlook, with the firm increasing the share price target from $650 to $700. This adjustment reflects a high single-digit percentage upside to the consensus earnings per share estimates for the year 2025. Evercore ISI sees potential for new revenue streams for Netflix, particularly from live events and gaming.

Comcast (NASDAQ:CMCSA) has recently introduced a $15 streaming bundle, StreamSaver, which includes Peacock, Netflix, and Apple (NASDAQ:AAPL) TV+. This strategic move is aimed at offering more value and convenience in the saturated streaming market. The StreamSaver service is set to launch for Xfinity customers in the United States.

Meanwhile, Netflix has retained its Buy rating and a stock price target of $725, following significant growth in its advertising-supported video on demand (AVOD) monthly active users. Analysts from TD Cowen see Netflix's AVOD strategy as a positive catalyst for the company's growth.

Lastly, KeyBanc Capital Markets has maintained its Overweight rating for both Netflix and The Trade Desk Inc . (NASDAQ:TTD), with Netflix's price target remaining at $705.00. The reaffirmed ratings reflect the anticipation that both companies are well-positioned to capitalize on the evolving AdTech landscape, particularly in the connected TV sector.

InvestingPro Insights

InvestingPro data shows that Netflix Inc. (NASDAQ: NFLX) is currently trading with a P/E Ratio of 44.24, which is slightly below the adjusted P/E ratio for the last twelve months as of Q1 2024, at 43.54. This valuation comes as Netflix experiences a robust revenue growth of 9.47% over the last twelve months, with an even more impressive quarterly revenue growth of 14.81% in Q1 2024.

With a market capitalization of $279.39 billion, the company's financials reflect a solid operating income margin of 22.54% and an EBITDA growth of 43.61% in the same period, showcasing its ability to generate profit and manage its earnings before interest, taxes, depreciation, and amortization efficiently.

Among the InvestingPro Tips for Netflix, two are particularly noteworthy in the context of the article: Netflix is trading at a low P/E ratio relative to near-term earnings growth and is a prominent player in the Entertainment industry. These tips underscore the streaming giant's competitive position and potential for future earnings expansion, aligning with KeyBanc Capital Markets' positive outlook and subscriber growth projections.

Moreover, there are 13 more InvestingPro Tips available for Netflix, which can be accessed for those looking for deeper investment insights. To explore these further, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.

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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