On Monday, JPMorgan reiterated its Overweight rating on Netflix (NASDAQ:NFLX) shares, maintaining a $610.00 price target. The firm's analysis points to a robust performance by the streaming giant, with shares climbing approximately 23% since the fourth quarter earnings report, compared to the S&P 500's 5% increase. Netflix's stock is currently trading around 12% below its all-time high reached in November 2021.
According to JPMorgan, Netflix is on track to accelerate its revenue growth in 2024, expand its profit margins, and increase free cash flow over multiple years. The firm expects Netflix to further refine its Paid Sharing restrictions and build its advertising scale gradually. They predict that changes in plans and pricing, along with strategic partner deals and marketing initiatives, will contribute to the growth of Netflix's advertising tier.
JP Morgan anticipates a more balanced revenue growth for Netflix in 2024, driven by both subscriber numbers and pricing adjustments. Price increases are expected to roll out to additional markets following targeted hikes in the United States, the United Kingdom, and France in the fourth quarter. In the near term, JPMorgan believes that investor expectations are set around 5 to 6 million new subscribers for the first quarter, which is higher than their own estimate of 4.5 million and the consensus of 4.1 million.
The firm also highlights Netflix's large scale, high user engagement, and diverse content offerings as strengths that will continue to position the platform as a top choice for long-form video content consumption globally.
JPMorgan's models forecast an average growth of almost 15% for Netflix's foreign exchange-neutral (FXN) revenue, 27% for operating income, and nearly 35% for GAAP EPS for 2024 and 2025. These projections support Netflix's premium valuation, with the price target based on approximately 28 times the estimated GAAP EPS of $21.65 for 2025, which corresponds to about 31 times the estimated free cash flow of $8.5 billion for the same year.
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