Pivotal Research has adjusted its outlook on Netflix (NASDAQ: NASDAQ:NFLX), increasing the stock's price target to $925 from $900 while reiterating a Buy rating.
The firm's analyst highlighted Netflix's impressive third-quarter performance, which saw subscriber growth surpassing expectations and a 15% rise in revenue, outpacing the forecasted 14%. Adjusted for currency, the revenue growth stood at 21%.
The streaming giant also reported a year-over-year EBITDA increase of 31%, exceeding Pivotal Research's prediction of 28%. Notably, Netflix's third-quarter free cash flow was significantly higher than anticipated. Following these results, the company has upgraded its full-year 2024 revenue, operating margin, and free cash flow projections.
Netflix's management has also provided robust forecasts for 2025 revenue and operating income growth, aligning with both the analyst's and consensus estimates. Pivotal Research believes that the operating income growth forecast may be conservative. The firm expects Netflix to continue achieving solid subscriber and Average Revenue Per User (ARPU) growth, driven by pricing strategies and the expansion of advertising, though partially offset by lower ARPU in developing markets.
In other recent news, Netflix's third-quarter financial results have exceeded market expectations, with the streaming giant reporting revenue approximately 1% higher than Wall Street forecasts and an operating income 7% above consensus.
Netflix's third quarter also saw a significant increase in subscribers, with 5.1 million net additions surpassing the Video Advertising consensus prediction of 4.6 million. Furthermore, Netflix has projected higher-than-expected figures for operating income, net income, and earnings per share (EPS) in the fourth quarter.
Citi has maintained a Neutral rating on Netflix, with a steady price target of $675, citing the company's recent performance and future projections as reasons for potential growth. Analysts from firms such as Morgan Stanley (NYSE:MS) and Bernstein have responded positively to these developments, raising their price targets for Netflix to $830 and $780, respectively. However, Phillip Securities has downgraded Netflix's stock from Buy to Neutral, despite raising the price target to $695.
Netflix'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 performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's market capitalization stands at an impressive $295.12 billion, reflecting its dominant position in the streaming industry. Netflix's revenue for the last twelve months as of Q2 2024 reached $36.30 billion, with a notable revenue growth of 13.0% over the same period.
InvestingPro Tips suggest that Netflix is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.59. This indicates that the stock may be undervalued considering its growth prospects. Additionally, Netflix has demonstrated a high return over the last year, with a one-year price total return of 98.63% as of the latest data.
These insights align with the article's positive outlook on Netflix's future performance and the increased price target set by Pivotal Research. For investors seeking 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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