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Investing.com -- Morgan Stanley (NYSE:MS) has named Netflix (NASDAQ:NFLX) its new Top Pick in the Media & Entertainment sector, replacing Walt Disney (NYSE:DIS).
The move comes as the Wall Street firm turns “incrementally bullish” on the streaming giant, expecting it “to demonstrate relative resilience in a weaker global macro.”
The bank reiterated an Overweight rating and the $1,150 price target on Netflix shares.
According to analysts Benjamin Swinburne and Thomas Yeh, Netflix’s momentum in the subscription business, combined with recent U.S. dollar weakness, should help de-risk 2025 estimates—even in a softer ad market.
While advertising growth is expected to double in 2025, the analysts emphasized that ads remain a small part of the overall business, accounting for just 10–15% of revenue growth and under 5% of total revenue.
They project that Netflix’s advertising revenues will grow from $700 million in 2024 to $1.3 billion this year.
“Our advertising expectations are driven by growth in ad-supported users, with no growth in advertising revenue per member (ad ARM) assumed,” analysts said.
The latest engagement data reinforced the bullish view, with users averaging nearly two hours of daily viewing.
“At nearly 2 hours of daily viewing per member, Netflix's engagement supports our view of continued pricing power going forward,” they noted. Over 94 billion hours were streamed in the second half of 2024, with original programming accounting for a dominant share of viewing among top-ranked titles.
Morgan Stanley projects adjusted earnings per share (EPS) growth of 20–25% annually over the next four years, driven by double-digit revenue growth and margin expansion.
The firm sees the global streaming market increasingly led by Netflix and YouTube, both now $40 billion-plus businesses. Netflix’s vertically integrated model, global content production scale, and strong IP library are seen as key differentiators.
In their bull case, Morgan Stanley analysts see Netflix shares rising to $1,500, supported by further subscriber upside and potential operating leverage.
On the other hand, a bear scenario—based on weaker macro conditions and rising regulatory pressures—implies a downside to $550.
The firm also highlighted Netflix’s robust content pipeline for 2025, including new seasons of major franchises like 'Stranger Things', 'Wednesday', and 'Squid Game', as well as strong recent performance from original limited series 'Adolescence', which is “on track to rank among the top English-language TV shows of all time across Netflix globally.”