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On Friday, FBN Securities initiated coverage on Netflix (NASDAQ:NFLX) shares with an Outperform rating and a price target set at $1,165.00. Currently trading at $976.72, the streaming giant boasts a market capitalization of $417.8 billion and a perfect Piotroski Score of 9, according to InvestingPro. The firm’s analyst, Matt Thornton, highlighted Netflix’s strong position within its total addressable market (TAM), which is estimated at $135 billion and expected to grow at a 9% compound annual growth rate (CAGR) over the next decade.
Netflix is seen as well-placed in this market due to several factors, including its impressive revenue growth of 15.65% over the last twelve months, high customer retention, organic brand awareness, and financial flexibility. The company’s strong performance is reflected in its remarkable 60.82% return over the past year. Thornton predicts that Netflix’s revenue will grow at a CAGR of 12%, 11%, and 9% over 3, 5, and 10 years, respectively. This growth is anticipated to be driven by various components, such as subscription services, member increases, and particularly advertising, which is forecasted to surge at rates of 64%, 47%, and 29% over the same periods.
The firm’s forecast for Netflix’s earnings before interest and taxes (EBIT) and earnings per share (EPS) are also optimistic, with expectations of 21%, 19%, and 15% for EBIT and 22%, 20%, and 18% for EPS over the 3, 5, and 10-year spans. These projections are based on Netflix potentially implementing new strategies such as additional advertising tiers, political ads, and self-serve ads.
Thornton’s analysis does not account for other potential growth avenues, such as gaming success, box office revenue contributions, display advertising, short-form video content, or e-commerce. Despite these exclusions, the forecast suggests that Netflix’s share of consumer TV spend could rise from 13% in 2024 to 22% in 2034, and its share of in-footprint TV ad spend could increase from 1% to 12%, even though these figures might be slightly overstated due to the expectation of additional advertising tier markets. For deeper insights into Netflix’s valuation and growth potential, including 15+ additional ProTips and comprehensive financial metrics, visit InvestingPro, where you’ll find exclusive analysis and the detailed Pro Research Report.
In other recent news, Netflix announced a $1 billion investment in Mexican film and TV production over the next four years, as stated by CEO Ted Sarandos. This initiative is expected to create jobs beyond the immediate production needs, potentially benefiting sectors like hospitality and tourism. Bernstein analysts have maintained an Outperform rating for Netflix, with a price target of $1,200, highlighting the company’s robust revenue growth driven by subscriber additions. They noted that Netflix’s profit margins are expanding due to this revenue growth outpacing content spending increases. Analysts from Bernstein SocGen Group also reiterated a positive outlook on Netflix, emphasizing the importance of the company’s pricing strategy and its exploration into live events and sports to increase user engagement. Netflix’s strategic moves into areas like Formula 1 racing and video podcasting are seen as ways to broaden its total addressable market. Additionally, Netflix revealed the third season of ’Squid Game’ will premiere on June 27, continuing the story of the popular series. The second season of ’Squid Game’ was a significant success, and the upcoming season is expected to maintain high viewer engagement.
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