Investing.com -- KeyBanc Capital Markets raised its price target for Netflix (NASDAQ:NFLX) to $1,000 from $785 a share on Tuesday, citing a combination of historical outperformance, moderating competition, and a promising outlook for revenue and free cash flow (FCF) growth.
The firm maintained its Overweight rating on the stock, expressing confidence in Netflix’s ability to outperform the S&P 500 into 2025.
Analysts highlighted that Netflix’s shares are trading at approximately 9x next-twelve-month (NTM) enterprise value-to-sales (EV/S), a level historically signaling peak valuation.
However, they argued, "this time may be different," citing the company’s pivot from paid net subscriber additions to an emphasis on engagement and viewership.
KeyBanc analysts noted, "Live events and returning originals are expected to attract users and advertisers.”
“Netflix's profit advantage over peers should sustain viewership gains," they added.
These factors, along with the platform’s strong monetization potential and FCF generation, underpin the analysts’ optimistic outlook.
Netflix’s historical narrative as a “share winner” has played a significant role in its performance, according to the bank.
KeyBanc states: "During these periods, the median return above the S&P 500 has exceeded 90% and the NTM EV/S multiple typically peaks between 9-10x."
While the firm acknowledges risks of valuation vulnerability at this level, they see unique catalysts this time around, including Netflix's ability to monetize its significant viewership advantage.
Despite lowering EPS estimates for 2024 and 2025 slightly due to foreign exchange (FX) impacts, KeyBanc reaffirmed its confidence in Netflix's medium-term growth.
“Netflix's consistent 10%+ revenue growth and 20%+ EPS growth profile over the medium-term should garner a premium to the Company's three-year median P/E of 30.4x,” the analysts wrote, justifying the $1,000 price target based on 32.5x 2026 estimated EPS of $30.80.