On Friday, Evercore ISI reiterated its Outperform rating and $950.00 price target on Netflix (NASDAQ:NFLX) stock. The firm’s analyst expressed confidence in the streaming giant’s upcoming fourth-quarter results, anticipating a modest beat on the consensus estimates.
According to InvestingPro data, Netflix has demonstrated strong momentum with a 75% return over the past year and currently trades at a P/E ratio of 47.2x. While the stock appears slightly overvalued based on InvestingPro’s Fair Value model, its financial health score is rated as "GREAT."
Despite anticipated negative foreign exchange (FX) impacts since the company’s third-quarter earnings reported on October 17, the analyst believes Netflix’s fourth-quarter revenue growth of 14.5% year-over-year, operating margin of 21.9%, and earnings per share (EPS) of $4.20 are reasonable and could see modest upside.
The analyst’s outlook aligns with the seasonal revenue increase of 3%, similar to the 3.4% growth seen in the same quarter of the previous year. They also expect Netflix to benefit from recent price increases in various markets such as Italy, Spain, and Japan.
The Street’s forecast of 9.0 million global net subscriber additions for the fourth quarter is seen as potentially conservative, given the strong content lineup, including the release of "Squid Game: Season 2" on December 26, and the boost from live events.
Looking ahead to the first quarter, the analyst suggests that the Street’s revenue growth estimate of 4% quarter-over-quarter might be slightly too optimistic because of the recent strength of the U.S. dollar. The projected operating income of $3.11 billion (30% margin) and EPS of $5.96 could also face pressure from FX headwinds.
InvestingPro analysis shows Netflix maintains strong fundamentals with a 45.25% gross profit margin and operates with a moderate debt level, with current assets sufficiently covering short-term obligations at a 1.13x ratio. Discover 15+ additional exclusive insights about Netflix with an InvestingPro subscription.
For the fiscal year 2025, the analyst anticipates Netflix will slightly lower its guidance for reported revenue growth from 11%-13% to 10%-12% and operating margin from 28% to 27%, mainly due to FX influences.
Evercore ISI expects Netflix to maintain its guidance on a FX-neutral basis. The firm’s updated currency analysis indicates a 4-point headwind to year-over-year growth from U.S. dollar strength. Nevertheless, the analyst believes that Netflix’s hedging strategies and potential price increases in high-inflation markets will likely result in only a modest reduction to the company’s revenue and operating income margin guidance for the fiscal year 2025.
Netflix is scheduled to report its fourth-quarter results on January 21. Evercore ISI forecasts $10.12 billion in revenue, $2.19 billion in operating income (21.6% margin), and $4.22 in GAAP EPS, which are in line with the company’s guidance and slightly below the Street’s expectations.
InvestingPro’s comprehensive analysis shows Netflix’s revenue growing at 14.8% year-over-year, with the company generating robust free cash flow of $7.1 billion in the last twelve months. Access the detailed Pro Research Report covering Netflix and 1,400+ other top stocks to make more informed investment decisions. The firm also predicts global paid subscriber net additions of 9.9 million, surpassing the Street’s anticipation of 9.6 million.
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