Netflix shares target raised, buy rating held on strong growth outlook

On Monday, TD Cowen has updated its outlook on Netflix (NASDAQ:NFLX) shares, raising the stock's price target to $820 from the previous $775, while reiterating a Buy rating. The firm's optimism is fueled by anticipated positive third-quarter results and ongoing business momentum.

The analyst from TD Cowen forecasts Netflix to report a higher-than-consensus increase in paid net member additions for the third quarter of 2024. The expected addition of 4.88 million members surpasses the consensus estimate of 3.89 million. This growth is attributed to several factors including the benefits from paid sharing, the accelerated adoption of the advertising-supported video on demand (AVOD) tier, and the overall strength of the business.

Netflix is set to release its third-quarter results on October 17, and the market is looking forward to insights on several aspects of the company's performance. Key points of interest include the progress of the AVOD service tier, strategies around monetization, and trends in profit margins.

The analyst's positive stance on Netflix is also backed by a consumer survey conducted for the third quarter of 2024. The findings of the survey highlight Netflix's dominant position as the preferred platform for living room entertainment. This consumer preference is a testament to the company's robust standing in the competitive streaming landscape.

In conclusion, TD Cowen's revised price target reflects a data-driven confidence in Netflix's business trajectory, as the company continues to innovate and grow in the dynamic streaming market. The market awaits the third-quarter results, which will provide further clarity on Netflix's performance and future prospects.

In other recent news, Netflix has been the subject of various analyst assessments. Piper Sandler upgraded Netflix stock from Neutral to Overweight, citing the company's potential for growth. In contrast, Barclays downgraded Netflix from Equalweight to Underweight due to concerns over the company's growth prospects.

KeyBanc Capital Markets, JPMorgan, and Evercore ISI projected positive revenue growth, with advertising expected to account for more than 10% of total revenue by 2027.

Netflix has also scheduled its third quarter 2024 earnings release. TD Cowen reiterated a Buy rating for Netflix, indicating faith in the company's advertising growth trajectory. The firm predicts that advertising will represent 13% of Netflix's total revenue by 2029.

The Philippines recently imposed a 12% value-added tax on digital services provided by tech giants like Netflix. This move aims to create a level playing field between these global entities and local businesses. The tax could generate approximately 105 billion pesos ($1.9 billion) from 2025 to 2029, with 5% of these funds earmarked to support Philippine creative industries. These are the recent developments in the company.

InvestingPro Insights

Netflix's strong market position, as highlighted in the article, is further supported by recent data and analysis from InvestingPro. The company's market capitalization stands at an impressive $308.87 billion, reflecting its dominant status in the entertainment industry.

Netflix's revenue growth remains robust, with a 16.76% increase in the most recent quarter, aligning with TD Cowen's optimistic outlook on the company's business momentum. This growth is complemented by a healthy operating income margin of 23.82% for the last twelve months, indicating efficient operations.

InvestingPro Tips point out that Netflix is trading near its 52-week high, which corroborates the positive sentiment expressed in the analyst's raised price target. Additionally, the company's high return over the last year, with a one-year price total return of 88.65%, underscores its strong performance in the market.

It's worth noting that while Netflix trades at a high P/E ratio of 43.91, it's also trading at a low P/E ratio relative to its near-term earnings growth, suggesting potential value for investors despite the high multiple. This nuanced view adds depth to the analysis presented in the article.

For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Netflix, providing a broader perspective on the company's financial health and market position.

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