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On Monday, Macquarie maintained its positive outlook on Netflix (NASDAQ:NFLX) shares, increasing the price target from $1,150 to $1,200 while retaining an Outperform rating. The upgrade follows Netflix’s revenue report, which showed a 12.5% increase to $10.5 billion, aligning with analyst expectations. According to InvestingPro data, Netflix has achieved impressive trailing twelve-month revenue of $40.17 billion, with 13 analysts revising their earnings estimates upward. The company anticipates a 15% growth in the second quarter of 2025, consistent with its five-year revenue CAGR of 14%.
Netflix’s United States and Canada (UCAN) region exhibited a 9.3% growth, a slowdown from the 15% seen in the fourth quarter of 2024. This deceleration was attributed to high comparison bases due to Super Bowl ads and the impact of a price increase that only affected part of the quarter. Management expects UCAN revenue growth to pick up again in the next quarter. Notably, Netflix’s monthly subscription price offers high value in terms of viewing hours when compared to its competitors, suggesting potential for future price increases. An example of this pricing power was demonstrated by a recent price hike in France. Additionally, Netflix offers the most affordable ad-supported tier at $7.99.
The company experienced a significant increase in operating margins, which rose to 31.7% from 28.1% in the first quarter of 2024, marking a 360 basis point improvement. InvestingPro analysis reveals Netflix maintains strong financial health with a perfect Piotroski Score of 9 and impressive profitability metrics, including a 46.92% gross margin and 41% return on equity. Marketing expenses decreased to 1.6% of revenue, while technology costs increased by 17% year over year as Netflix invests in expanding its advertising technology infrastructure. A notable point in the financials was the quarter-over-quarter decline in the streaming content asset, suggesting that content amortization rates are higher than cash content spending.
According to Nielsen data, Netflix grew its average engagement share in the first quarter of 2025 to 8.2%, up from 8.1% in the same quarter of the previous year. Management also commented on advertising performance, confirming that there has been no observed slowdown in ad spending amid current economic uncertainties. This resilience is possibly due to the platform’s newness in the ad market. Improvements in fill rates have been aided by the rollout of programmatic advertising across all major markets. The launch of Netflix’s Ads Suite tool on April 1 is expected to bolster long-term growth by attracting advertisers through advanced targeting, programmatic capabilities, and enhanced measurement. InvestingPro subscribers can access detailed financial analysis, including 18 additional ProTips and comprehensive valuation metrics in the Pro Research Report, essential for understanding Netflix’s growth trajectory and market position.
In other recent news, Netflix has reported strong financial results for the first quarter, with revenue reaching $10.5 billion, marking a 12.5% year-over-year increase. The company’s operating income exceeded expectations, coming in at $3.3 billion, and earnings per share (EPS) surpassed estimates at $6.61. Netflix maintained its revenue guidance for 2025, with Wells Fargo (NYSE:WFC) noting a potential for higher margins due to foreign exchange benefits. Oppenheimer has raised its price target for Netflix to $1,200, citing the company’s effective pricing strategy in the U.S. and France, which has not led to increased customer turnover. Morgan Stanley (NYSE:MS) also increased its price target to $1,200, highlighting Netflix’s predictable business model and potential for EPS growth of 20-25% annually over the next four years. Loop Capital maintained its Hold rating with a $1,000 price target, acknowledging revenue growth that exceeded management’s guidance. Benchmark analysts have kept a Hold rating on Netflix, estimating its fair value at around $1,070, while considering the company’s long-term growth potential. Netflix’s share buyback program has been robust, with $3.5 billion repurchased this quarter, demonstrating the company’s commitment to enhancing shareholder value.
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