By Senad Karaahmetovic
Morgan Stanley (NYSE:MS) analysts have reiterated an Equal-weight rating on Netflix (NASDAQ:NFLX) shares and a $230 per share price target.
The analysts remain cautious about Netflix stock as several risks, such as market saturation, rising competition, and a weakening global consumer, may not be adequately reflected in estimates and valuation.
On the other hand, the analysts argue that an earnings boost from the ad-tier opportunity may already be reflected.
"We continue to see Netflix as the clear market leader in streaming, but still a maturing business in a highly competitive market facing a global consumer under increasing economic stress. While we see the ad-supported tier as a TAM expander and paid sharing as ARPU enhancing, it is not clear to us these initiatives offer meaningful upside to expectations," the analysts said in a client note.
On the valuation front, the analysts say it is not "overly compelling," but also not stretched, hence the reiterated EW rating.
Overall, the analysts lowered EPS estimates to reflect FX headwinds, which offset higher net adds estimates.
"We continue to expect a high-teens EPS CAGR for '23-25E, with our '25E EPS estimate up ~1% vs. our prior expectations as the cumulative benefit of higher net additions begins to offset the impact of currency headwinds longer term."
Netflix shares closed over 3% higher yesterday.