Netflix maintains buy rating and stock price target on ad tier optimism

Netflix maintains buy rating and stock price target on ad tier optimism
Credit: © Reuters.

On Friday, Netflix Inc. (NASDAQ: NFLX ) retained its Buy rating and a stock price target of $725, following the streaming giant's recent Upfront event. The event, which took place on May 15-16, showcased Netflix's advertising-supported video on demand (AVOD) tier and a preview of its upcoming content offerings.

During the Upfront, Netflix revealed significant growth in its AVOD monthly active users (MAUs), reporting 40 million MAUs compared to 23 million in January 2024. Additionally, the company announced plans to bring its ad technology in-house by 2025 and disclosed the addition of Christmas NFL games to its content lineup.

The analyst from TD Cowen expressed a positive outlook on Netflix's AVOD strategy, considering the ramp-up as a positive catalyst for the company's growth. The move to an in-house ad tech platform was also seen as a strategic step for Netflix's long-term growth.

The analyst's reinforced Buy rating and price target are based on the raised subscriber estimates for the AVOD service. The belief is that the advertising tier will serve as a key driver for Netflix's future expansion.

Netflix's stock maintains a strong position with the backing of industry experts, as the company continues to evolve its service offerings and explore new revenue streams like the AVOD tier.

InvestingPro Insights

As Netflix Inc. (NASDAQ:NFLX) embraces its advertising-supported video on demand (AVOD) tier, it's pertinent to consider the company's financial metrics and market performance. According to InvestingPro data, Netflix has a market capitalization of $266.97 billion, showcasing its significant presence in the entertainment industry.

The company's P/E ratio stands at 42.4, which, when compared to its near-term earnings growth, indicates that it is trading at a low P/E ratio. This aligns with one of the InvestingPro Tips, which suggests that Netflix's current valuation may be attractive relative to its earnings potential.

Moreover, Netflix has demonstrated a commendable revenue growth of 9.47% over the last twelve months as of Q1 2023, with an even higher quarterly growth rate of 14.81% in Q1 2023. The company's operating income margin of 22.54% further reflects its profitability and efficient management. These metrics are crucial for investors considering the company's growth trajectory, especially as Netflix expands its AVOD service.

InvestingPro also highlights that Netflix has had a high return over the last year, with a 79.59% price total return, emphasizing its strong market performance. For those interested in further insights, InvestingPro offers additional tips on Netflix's financial health and market position. By using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable InvestingPro Tips.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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