On Monday, Macquarie analysts increased the price target on Netflix shares (NASDAQ:NFLX) to $965 from the previous $795, maintaining an Outperform rating. The optimism appears well-founded, as Netflix has delivered a remarkable 70% return over the past year and currently commands a market capitalization of $358 billion.
The firm's analysts predict that Netflix will end 2024 with an addition of more than 33 million subscribers worldwide, reaching a total of 293 million. They note the potential for these numbers to be surpassed, citing the success of events and releases such as the Paul/Tyson fight, NFL Christmas games, and Squid Game 2. According to InvestingPro, Netflix maintains a GREAT financial health score, with 15+ additional insights available to subscribers.
The report acknowledges that this will be the last time Netflix reports subscriber numbers, suggesting investors will need to shift their focus to new metrics. Despite the possibility of a slowdown in subscription growth due to the completion of paid sharing enforcement, Macquarie does not equate this with slower company growth. This confidence aligns with Netflix's strong revenue growth of 14.8% over the last twelve months.
They highlight several growth drivers for Netflix, including advertising revenue and live events. For deeper insights into Netflix's growth metrics and valuation, investors can access comprehensive analysis through InvestingPro's detailed research reports.
The analysts at Macquarie estimate that advertising revenue will significantly contribute to Netflix's finances, projecting $2 billion in 2025, $3 billion in 2026, and $4.5 billion in 2027 as partnerships with The Trade Desk (NASDAQ:TTD) and Magnite mature. They also foresee a positive impact from a potential 10-15% price increase to the US standard plan, which could add approximately $600 million annually to the revenue.
Live events are also expected to play a crucial role in subscriber growth and retention, with the report mentioning Netflix's current contracts and potential future sports rights acquisitions. The recent commencement of the WWE contract, the acquisition of the next two Women's World Cups, and the possibility of obtaining MLB and NFL rights in the coming years are seen as opportunities for Netflix to leverage its global scale.
The analysis concludes with an optimistic view that Netflix will manage content costs effectively while aiming to achieve a 30% operating margin by 2027, despite anticipated increases in content spending. The company already demonstrates strong financial efficiency with a current gross profit margin of 45.25% and operates with a moderate level of debt, according to InvestingPro data.
In other recent news, Netflix has seen a flurry of analyst activity, with varying outlooks on the streaming giant's financial future. Guggenheim raised its price target on Netflix to $950, citing expectations for core revenue growth of approximately 14%, driven by factors such as global member growth and the expansion of ad revenue. Goldman Sachs (NYSE:GS) also increased Netflix's price target to $850, highlighting the importance of the company's pricing strategy and advertising-supported initiatives.
Benchmark maintained its Sell rating on Netflix's shares, citing overvaluation despite the company's superior execution and global scaling advantages. On the other hand, UBS reaffirmed a Buy rating on Netflix, emphasizing the company's successful venture into sports broadcasting and potential growth in advertising.
KeyBanc Capital Markets has expressed confidence in Netflix's potential to outperform the S&P 500 into 2025, raising the price target to $1,000 from the previous $785. Although Loop Capital downgraded Netflix from Buy to Hold, Oppenheimer maintains an Outperform rating, citing potential for higher monetization and subscriber estimates.
These recent developments reflect the financial industry's mixed perspectives on Netflix's future performance, underscoring the importance of earnings and revenue information for investors.
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