On Friday, Netflix (NASDAQ:) acquired an improve to ‘Purchase’ from ‘Maintain’ by Needham, with the agency setting a brand new value goal of $700 for the streaming big’s inventory. The improve follows Netflix’s first-quarter earnings launch, which showcased a income of $9.4 billion, marking a 15% year-over-year enhance and surpassing estimates by 1%. The corporate’s GAAP earnings per share (EPS) additionally rose considerably by 83% year-over-year to $5.28, exceeding estimates by 18%.
Needham’s choice to improve Netflix is predicated on a number of key elements. First, analysts anticipate income progress because of the firm’s technological developments, together with GenerativeAI, which is anticipated to be notably useful for tech-first firms like Netflix. Moreover, Netflix’s international scale is seen as a serious benefit in maximizing the worth of its information.
The agency additionally cites upcoming value will increase and promoting income as catalysts that ought to speed up Netflix’s income progress and broaden its revenue margins. Analysts’ optimistic outlook is additional bolstered by the corporate’s sturdy first-quarter subscriber additions, which totaled 9.3 million, bringing the entire subscriber rely to 270 million.
Moreover, Needham highlights Netflix’s free money move (FCF), which reached $2.1 billion within the first quarter of 2024. The agency believes that Netflix’s FCF and return on invested capital (ROIC) will proceed to outperform estimates. That is attributed to the corporate’s steady content material spending of $17 billion and the ratio of money content material spending versus amortization remaining at roughly 1.1 occasions.
Along with these monetary metrics, Netflix has indicated plans to make use of its FCF to repurchase shares as a substitute of paying down debt, a technique that would probably improve shareholder worth. The mix of those elements has led analysts to boost their estimates and supply a extra optimistic outlook for Netflix’s inventory efficiency.
