Analyst’s Optimistic Outlook
Last week, Netflix (NFLX) revealed that its ad-supported tier had exceeded 23 million monthly active users (MAUs), a significant surge from the 15 million recorded in November and a substantial leap from the 5 million subs in May. Oppenheimer analyst Jason Helfstein asserts that this accelerating pace of ad subs is a strong indicator for Q4 net additions, which he anticipates will surpass both the company’s guidance and Street expectations. Helfstein’s forecast of 10 million consolidated net additions in Q4 outstrips the consensus figure of 8.7 million.
Potential for Sustained Growth
Utilizing the announced data points for ad-supported users, Helfstein projects incremental monthly adds, with his analysis suggesting a noteworthy increase in the user base in December and January. He is optimistic about Netflix’s long-term prospects, projecting ad-supported MAUs to reach 51 million by year-end. According to Helfstein, the rapid growth in subscriber numbers corroborates a strengthening bull thesis. He highlights the positive impact on average revenue per membership (ARM) from accelerated advertising scale, which in turn is expected to drive higher revenue and substantial incremental margins.
Revenue and Stock Projections
Helfstein envisions potential ad revenue of $6 billion by 2025, factoring in a conservative 80% margin, thus indicating a substantial increase in incremental EBITDA compared to 2023 estimates. This, he believes, will allow Netflix to allocate more funds for content creation or share repurchases or possibly both, resulting in a new price target of $600, reflecting a 22% growth projection over the upcoming year.
Market Perspective and Forecasts
However, it is worth noting that the optimistic view from Oppenheimer is an outlier in a generally less bullish landscape. The average price target for Netflix currently sits at $491.10, similar to the current trading price. The stock holds a Moderate Buy consensus rating, based on 25 Buy, 9 Hold, and 1 Sell recommendations.
To find lucrative stock ideas, investors can explore TipRanks’ Best Stocks to Buy.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts and are for informational purposes only. It is essential to conduct personal analysis before making any investment decisions.