On Friday, Oppenheimer maintained a positive stance on Netflix (NASDAQ:NFLX), reiterating an Outperform rating with a $725.00 price target. The firm highlighted Netflix's better-than-expected subscriber additions and raised margin guidance for the fiscal year 2024. The company reported 9.3 million net additions in the first quarter, surpassing both Oppenheimer's and the Street's expectations of 6.1 million and 4.9 million, respectively.
The streaming giant has also increased its FY24 margin guidance to 25%, up from the previous 24%. This comes amid a modest rise in subscribers to its ad-supported tier, which saw a 65% quarter-over-quarter increase, albeit slightly lower than the 70% growth observed in the third and fourth quarters of 2023.
While current ad-tier monetization remains minimal, Oppenheimer anticipates positive developments from the upcoming US Upfronts in May and June, which could lead to enhanced monetization. Additionally, the potential for international price increases towards the end of 2024 or early 2025 could further support investor optimism.
The firm also expects Netflix to ramp up share repurchases, forecasting $26 billion in free cash flow and repurchases from 2024 to 2026, despite a projected $53 billion spend on cash content during the same period.
The price target set by Oppenheimer is based on a 30 times multiple of Netflix's estimated 2025 earnings per share, which implies a 25 times multiple for 2026. This valuation represents a 7% premium over peers, justified by Netflix's 23% faster growth rate.
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