Goldman Sachs (NYSE:GS) has adjusted its outlook on Netflix (NASDAQ: NASDAQ:NFLX), increasing the price target from $705.00 to $750.00, while maintaining a Neutral rating on the stock.
The adjustment follows Netflix's third-quarter earnings report for 2024, which featured better-than-expected operating income and a slight miss on subscriber net additions.
The report revealed that Netflix's performance was in line with or ahead of Goldman Sachs and broader market expectations for the fourth quarter of 2024 and the full year 2025.
The company's consistent messaging through the end of 2024 and into 2025 indicates a strategy focused on solid revenue growth and subscriber expansion, despite no longer reporting subscriber numbers starting in the first quarter of 2025.
Netflix's initiatives, such as advertising mix and efforts to address password sharing, are expected to contribute to subscriber growth. The company also expresses a strong intent to continue improving operating margins and returning free cash flow to shareholders through buybacks.
Goldman Sachs anticipates that Netflix's business model and product innovations will position the company as a consistent source of double-digit revenue growth with potential for margin expansion in the upcoming years. Nevertheless, the firm's stance reflects a balanced view of the risks and rewards associated with Netflix's stock at its current market price.
In other recent news, Netflix's third-quarter financial performance exceeded market expectations, with a significant increase of 5.1 million net subscribers, surpassing the Video Advertising consensus prediction of 4.6 million.
The company's revenue growth stood at 15%, outpacing the predicted 14%, and the year-over-year EBITDA increase was 31%, exceeding Pivotal Research's forecast of 28%. Following these results, Netflix upgraded its full-year 2024 revenue, operating margin, and free cash flow projections.
Analysts have responded to these developments with varying outlooks. Pivotal Research increased the stock's price target to $925, maintaining a Buy rating, while Citi maintained a Neutral rating with a steady price target of $675.
Phillip Securities downgraded Netflix's stock from Buy to Neutral but raised the price target to $695. Morgan Stanley (NYSE:MS) and Bernstein have raised their price targets for Netflix to $830 and $780, respectively.
Netflix's management has provided robust forecasts for 2025 revenue and operating income growth, aligning with both the analyst's and consensus estimates. 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
Netflix's strong market position and financial performance are reflected in recent InvestingPro data. The company boasts a substantial market capitalization of $295.12 billion, underscoring its dominance in the entertainment industry. Netflix's revenue growth remains robust, with a 16.76% increase in the most recent quarter, aligning with Goldman Sachs' projection of consistent double-digit revenue growth.
InvestingPro Tips highlight Netflix's financial strength, noting that "cash flows can sufficiently cover interest payments" and the company "operates with a moderate level of debt." These factors support Netflix's strategy to return free cash flow to shareholders through buybacks, as mentioned in the article.
The stock's impressive performance is evident in its 98.63% price total return over the past year, significantly outperforming the broader market. This aligns with Goldman Sachs' positive outlook on Netflix's business model and product innovations.
For investors seeking a deeper understanding of Netflix's valuation and growth prospects, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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