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Jefferies has maintained its optimistic stance on Netflix Inc. (NASDAQ: NASDAQ:NFLX), reiterating a Buy rating and $780.00 price target for the streaming giant's stock.
The firm highlighted several key factors poised to drive the company's continued success, including the anticipated benefits from curbing password sharing and expanding its international subscriber base.
The analyst at Jefferies pointed out that these strategies are expected to contribute to another quarter of strong subscriber additions. The attention of investors has now turned to the potential timing and magnitude of Netflix's upcoming price increase.
It is anticipated that the company will raise the price of its Standard subscription tier to $17.99 in the fourth quarter, which could result in approximately a 2% increase in the average revenue per user (ARPU) for the United States and Canada region, compared to current Wall Street estimates.
Should Netflix opt for a more aggressive pricing strategy, increasing the Standard tier to $19.99, this could lead to an even more significant, roughly 7% upside to the current Street ARPU forecasts for the fiscal year 2025.
The analyst expressed confidence in Netflix's upcoming content slate for the second half of the year, which includes high-profile releases such as NFL coverage, a new season of "Squid Game," and a Mike Tyson fight event. These offerings, combined with the expected price adjustments, underpin Jefferies' bullish outlook on the stock.
In other recent news, Netflix has been the subject of multiple analyst upgrades and downgrades. Guggenheim maintained a Buy rating and increased Netflix's price target to $810, citing potential for global member growth, accelerating advertising revenue growth, and content engagement leadership as key factors.
Oppenheimer also raised its price target to $775, anticipating robust financial results and a potential pricing increase. Morgan Stanley raised its price target for Netflix to $820, expressing confidence in the company's growth potential. However, Citi maintained a neutral stance, expressing skepticism about Netflix's ability to achieve a projected earnings per share (EPS) of $25 next year.
Deutsche Bank and JPMorgan also increased their price targets for Netflix, citing potential growth in revenue and earnings. However, Barclays downgraded Netflix due to concerns over the company's growth prospects.
In other recent developments, the Philippines imposed a 12% value-added tax on digital services provided by tech giants like Netflix, expected to generate approximately 105 billion pesos ($1.9 billion) from 2025 to 2029.
Analysts from firms such as KeyBanc Capital Markets, JPMorgan, and Evercore ISI project positive revenue growth for Netflix, with advertising expected to account for more than 10% of total revenue by 2027.
InvestingPro Insights
Netflix's strong market position and financial performance align with Jefferies' bullish outlook. According to InvestingPro data, Netflix boasts a market capitalization of $313.41 billion, reflecting its dominant position in the streaming industry. The company's revenue growth of 13.0% over the last twelve months and an impressive 16.76% quarterly growth underscore its continued expansion, supporting Jefferies' expectations for strong subscriber additions.
InvestingPro Tips highlight Netflix as a "Prominent player in the Entertainment industry" with a "High return over the last year," corroborating the analyst's positive stance. The company's price-to-earnings (P/E) ratio of 44.75 suggests investors are willing to pay a premium for its growth prospects, which aligns with the anticipated benefits from password sharing crackdowns and international expansion mentioned in the article.
Interestingly, while Netflix is "Trading at a high earnings multiple," it's also "Trading at a low P/E ratio relative to near-term earnings growth," with a PEG ratio of 0.63. This indicates that despite its high valuation, Netflix's stock price may still have room for growth relative to its earnings potential, supporting Jefferies' $780 price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Netflix, providing a deeper understanding of the company's financial health and market position.
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