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Piper Sandler has expressed optimism regarding Netflix’s (NASDAQ:) future by raising its price target for the company’s shares from $800 to $840, while reaffirming an Overweight rating.
This revision follows Netflix’s recent announcement of its third-quarter performance alongside its outlook for the fourth quarter, both of which exceeded market expectations. Additionally, the streaming service provided initial guidance for 2025 that remains in line with current forecasts.
In its third-quarter results, Netflix reported a substantial revenue growth in the mid-teens, which is impressive considering last year’s tough comparisons. Piper Sandler highlighted that Netflix’s 2025 revenue guidance suggests a year-over-year growth of 11%-13%. This growth is expected to be driven mainly by subscriber increases, with the company managing to meet analysts’ expectations without needing to raise prices significantly in the UCAN region.
After realigning expectations for its advertising-supported tier during the second-quarter call, Netflix’s leadership has demonstrated renewed confidence in its strategic execution. Consequently, Piper Sandler has reiterated its Overweight rating and adjusted the price target upward to better reflect the company’s positive outlook and implementation efficacy.
In recent developments, Netflix has surpassed subscriber growth expectations, adding 5.1 million new subscribers in the third quarter compared to the anticipated 4 million. Alongside this, the company reported earnings per share of $5.40, exceeding the forecast of $5.12, and revenue that reached $9.825 billion, surpassing expectations of $9.769 billion.
KeyBanc also reiterated its Overweight rating for Netflix, increasing its price target from $760 to $785 post-third-quarter earnings. The firm anticipates that Netflix will exceed operating margin expectations for the upcoming quarter, alongside projecting an 11-13% revenue growth year-over-year and an operating margin of 28% by 2025.
In its strategy to enhance revenue diversity, Netflix is planning to roll out ad-supported subscription plans and explore opportunities in live events. Notably, in November, the company will stream a boxing match featuring social media star Jake Paul and boxing icon Mike Tyson.
Analysts at Loop Capital have also raised Netflix’s price target from $750 to $800 while maintaining a “Buy” rating, underpinned by expected subscriber and revenue expansions. Conversely, Benchmark has retained a Sell rating, citing potential challenges such as consumer pushback against price increases.
Evercore ISI has reaffirmed its Outperform rating, suggesting that the current market expectations for Netflix’s revenue growth in the third quarter are in line with typical seasonal trends.
InvestingPro Insights
The positive performance and promising outlook for Netflix, as noted by Piper Sandler, are further validated by data from InvestingPro. The company holds a significant market capitalization of approximately $295.12 billion, highlighting its strong position within the entertainment sector.
Recently, Netflix reported a 13% revenue growth over the past twelve months as of Q2 2024, demonstrating an even more robust 16.76% growth for the latest quarter. This aligns with Piper Sandler’s characterization of mid-teens revenue growth and supports an optimistic forecast for 2025.
According to InvestingPro analyses, Netflix is currently trading at a relatively low P/E ratio when considering its near-term earnings growth potential, with a PEG ratio of 0.61. This could indicate that the stock is undervalued regarding its future growth opportunities, potentially backing Piper Sandler’s revised price target.
Additionally, Netflix’s strong profitability metrics include an operating income margin of 23.82% over the past year. This solid profitability underpins Piper Sandler’s assertion that Netflix could surpass its initial operating margin targets for 2025.
For investors aiming to gain a comprehensive understanding of Netflix’s financial stability and growth prospects, InvestingPro provides 14 further insights, offering deep analysis into the company’s overall performance and future outlook.
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