On Friday, Phillip Securities adjusted its stance on Netflix (NASDAQ:NFLX), changing the stock's rating from Buy to Neutral, while simultaneously increasing the price target to $695 from the previous $695. This decision follows the company's third-quarter results, which revealed revenue numbers slightly above the firm's estimates and a profit after tax and minority interests (PATMI) that exceeded expectations due to strong top-line growth and favorable timing of content expenditure.
The first nine months of 2024 saw Netflix's revenue and PATMI reach 74% and 84% of Phillip Securities' full-year 2024 estimates, respectively. Notably, the company's revenue has been expanding at a robust double-digit year-over-year rate, and its 41% PATMI growth outperformed estimates by 6%, driven by higher revenue and improved operating leverage.
Phillip Securities has increased its full-year 2024 PATMI forecast by 6%, citing higher margins from price increases, growing operating leverage, and stringent cost control. Despite the upgrade to the discounted cash flow (DCF) target price, the firm has shifted to a Neutral rating due to the recent strength in Netflix's share price. The firm's revenue forecast for the full year 2024 and the assumptions for the weighted average cost of capital (WACC) and growth rate remain consistent.
Netflix continues to strengthen its leading position in the video on demand (VoD) streaming industry, enhancing both its user base and average revenue per member (ARM) through high-quality content and strategic pricing. The company's ARM is approximately twice that of its closest competitor, Disney, indicating a significant advantage in the marketplace.
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