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Benchmark has reiterated its Sell rating on Netflix (NASDAQ: NASDAQ:NFLX) with a price target of $545.00.
The firm's analysis suggests that Netflix's future revenue and profit growth will increasingly rely on pricing strategies and new ventures such as ad-supported video on demand (AVOD) and gaming, as subscriber growth is expected to slow down.
The rating is maintained ahead of Netflix's earnings report, which is scheduled to be released after the market closes on Thursday, October 17.
The firm highlights the challenges Netflix may face, including consumer resistance to price increases and a focus on expanding in emerging markets where pricing points are lower.
Despite these challenges, Benchmark's baseline forecast allows for a potential global membership of over 430 million by 2033, up from the current 277 million, with a sustainable operating margin of over 35%. However, the firm expresses more confidence in the operating margin forecast than in the membership growth projection.
In other recent news, Netflix is anticipated to announce its Q3 2024 results soon, with expectations of subscriber growth surpassing Wall Street estimates. The streaming giant's strategies, including its ad-supported subscription tier and approach to sports content, have been closely watched.
Analyst firms, including Citi and Jefferies, have maintained their neutral and buy ratings on Netflix respectively, while Guggenheim has upgraded its price target to $810. These ratings reflect the company's potential for global member growth and expected rise in advertising revenue.
Netflix's potential price increase for its services in the United States is also a topic of interest among investors. The company's decision on this matter could significantly influence its market positioning and future growth trajectory. However, Barclays has downgraded Netflix due to concerns over its growth prospects.
In other recent developments, the Philippines has imposed a 12% value-added tax on digital services, such as those provided by Netflix, which is expected to generate approximately 105 billion pesos ($1.9 billion) from 2025 to 2029.
InvestingPro Insights
To complement Benchmark's analysis, recent data from InvestingPro offers additional context on Netflix's financial performance and market position. As of the last twelve months ending Q2 2024, Netflix reported a revenue of $36.30 billion, with a notable revenue growth of 13.0%. The company's operating income margin stands at a robust 23.82%, reflecting its ability to convert revenue into profit effectively.
InvestingPro Tips highlight that Netflix is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.62. This suggests that the stock might be undervalued when considering its growth prospects, contrasting with Benchmark's cautious stance. Additionally, Netflix's strong return over the last year, with a one-year price total return of 100.46%, indicates significant market confidence in the company's performance and strategy.
It's worth noting that Netflix is trading near its 52-week high, with its current price at 96.88% of the 52-week high. This aligns with Benchmark's observation of the stock's high valuation. Investors seeking a more comprehensive analysis can access 15 additional InvestingPro Tips for Netflix, providing a broader perspective on the company's financial health and market position.
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