Netflix Inc NFLX is gearing up to release its first-quarter
earnings on April 18.
All eyes are on the streaming giant amid rising anticipation and optimistic
projections. Netflix stock has outperformed the S&P 500 Index year-to-date by good measure, gaining over
31% while the S&P 500 index is up more than 9%.
The Analyst’s Bullish View
Analyst Doug Anmuth from JPMorgan has shared insights
that paint a bullish picture for Netflix, attributing the positive outlook to several key factors. Doug has an
Overweight rating on the stock and raised his price target from $610 to $650 a share.
Factors Driving Growth and Revenue Momentum
Anmuth highlighted Netflix’s potential to accelerate revenue growth throughout
2024. Robust organic growth, the innovative Paid Sharing initiative, and strategic price adjustments are expected
to drive this forecast. Netflix’s solid leadership position in the streaming landscape and a favorable
environment for content acquisition underpin this projection.
Paid Sharing Strategy and Subscriber Growth
Anmuth emphasized the significant impact of Netflix’s Paid Sharing initiative, which
has contributed to strong subscriber and revenue growth. Despite capturing low-hanging fruit in 2023, Paid
Sharing still presents meaningful monetization opportunities for Netflix.
Estimates suggest potential growth in borrower conversion rates. “Netflix monetized ~22M
borrowers at the end of 2023” and “can monetize 36M borrowers by the end of 2024 & 43M by the end of 2025,”
said Anmuth. Additionally, healthy organic subscriber trends further bolster Netflix’s position in the market.
Innovative Content Slate and Advertising Growth
“The content slate continues to support strong engagement, with notable 1Q content
including Avatar: The Last Airbender, Damsel, Fool Me Once, Griselda,
Lift, Society of the Snow, The Gentlemen, & 3 Body Problem,” noted
Anmuth.
While advertising revenue isn’t expected to make a significant contribution until 2025,
Netflix is actively ramping up its ad tier scale through strategic pricing and marketing maneuvers.
Anmuth sees this focus on ad tier expansion as a key priority for the company’s future
growth trajectory.
Positive Earnings Outlook and Growth Trajectory
“We model average 2024 & 2025 growth of 15% for FXN revenue, almost 30% for operating
income, & 35% for GAAP EPS,” Anmuth said. Anmuth’s projections indicate optimism surrounding the company’s
earnings and growth potential.
Despite elevated near-term expectations, Anmuth remains bullish on Netflix, projecting a
steady increase in net adds and revenue throughout 2024. These estimates couple with expectations for margin
expansion and steady operating income growth, further reinforcing the company’s position as a market leader.
Anmuth’s bullish stance drives an increased price target of $650, underpinned by
expectations of continued revenue acceleration and margin expansion.
As Netflix prepares to unveil its earnings report, investors remain optimistic about the
company’s future trajectory in the streaming landscape.
