On Friday, Rosenblatt Securities updated its outlook on Netflix (NASDAQ: NASDAQ:NFLX) stock, increasing the price target to $680 from $635, while maintaining a Neutral rating on the stock. The adjustment followed Netflix's third-quarter earnings report, which saw the company's shares rise by 5% after hours. This increase adds to a 41% year-to-date (YTD) climb, outpacing the S&P 500's 23% gain.
The analyst highlighted the strong performance in net subscriber additions during the third quarter of 2024, a metric that Netflix will stop reporting next year. Despite this change, the company's revenues grew by 15.0% year-over-year (Y/Y), surpassing guidance by 110 basis points (bps), or 170bps on a constant currency basis. Operating income reached $2.909 million, exceeding expectations by 6.6%, with a significant margin expansion of 720 bps to 29.6%.
Looking ahead to 2025, the analyst anticipates a slowdown in sales growth to a range of 11% to 13%, as the impact of paid sharing begins to wane. The operating margin is projected to rise by only 100 bps year-over-year, due to investments in various initiatives such as the advertising platform, gaming expansion, live events, sports, and user interface improvements.
In light of these projections, Rosenblatt has adjusted its operating income estimates for 2025 downwards. Nevertheless, the firm has raised its price target for Netflix by 7% to $680, which is near the current trading levels, assuming the company can maintain its current forward multiple. Despite the positive earnings report, Rosenblatt reiterates its Neutral stance on the stock.
In other recent news, Netflix's third-quarter performance exceeded expectations with a significant increase in subscribers and robust revenue growth. Analysts from Seaport Global Securities have maintained a neutral rating, citing the company's robust business model and future growth prospects, while expressing concerns about the current stock valuation. Goldman Sachs, on the other hand, raised its price target for Netflix from $705 to $750, maintaining a neutral rating.
Pivotal Research also adjusted its outlook on Netflix, raising the stock's price target to $925 and reiterating a buy rating due to the company's impressive third-quarter performance. Citi maintained a neutral rating on Netflix with a steady price target of $675, highlighting the company's recent financial achievements and potential for share value increase.
These recent developments underline Netflix's robust growth strategy and performance, which includes diversifying revenue streams through advertising, gaming, and live content. The company's full-year revenue growth expectations have been revised upward to 15%, and the operating income margin is projected to reach 27% by 2024. Looking ahead to 2025, Netflix anticipates 11-13% revenue growth and a 28% margin.
InvestingPro Insights
Recent data from InvestingPro adds depth to Rosenblatt's analysis of Netflix. The company's market capitalization stands at $295.12 billion, reflecting its significant position in the entertainment industry. Netflix's P/E ratio of 42.36 aligns with Rosenblatt's observation of the company trading at current forward multiples.
InvestingPro Tips highlight Netflix's strong financial performance, noting its high return over the last year, which is consistent with the reported 98.63% one-year price total return. This exceptional performance supports the stock's 41% YTD climb mentioned in the article. Additionally, Netflix's revenue growth of 13.0% in the last twelve months corroborates the article's reported 15.0% Y/Y revenue growth.
Another relevant InvestingPro Tip indicates that Netflix operates with a moderate level of debt, which could be reassuring for investors considering the company's planned investments in various initiatives for 2025.
For readers seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Netflix, providing a deeper understanding of the company's financial health and market position.
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