Streaming giant Netflix Inc NFLX could have some of its most anticipated content released with two NFL games and the release of "Squid Game” season two in December, content that an analyst said could help boost the future valuation of the stock.
The Netflix Analyst: KeyBanc Capital Markets analyst Justin Patterson reiterated an Overweight rating and raised the price target from $735 to $760.
The Netflix Takeaways: While most attention for Netflix will be on the upcoming third-quarter results on Oct. 17, Patterson highlights the company's fourth-quarter content slate and the potential for increased earnings per share in fiscal 2025 and fiscal 2026.
"We believe Netflix's strengthening content slate should drive better viewership and support improved monetization," Patterson said.
The analyst said the third-quarter results and fourth-quarter guidance may not contain any surprises, but the company's content catalysts "are weighted toward the end of 4Q."
Netflix will air two National Football League games on Dec. 25 and premiere the highly anticipated second season of "Squid Game" on Dec. 26, the analyst added.
"As content ramps and pricing levels are pulled, we see potential for EPS of $24/$30 in 2025E/2026E."
Patterson predicts Netflix will add 5.5 million net paid adds in the third quarter, which is higher than Street consensus estimates of 4.3 million net adds.
"Given NFL Christmas Day games and Squid Game 2 occur late in the quarter, we expect Netflix to take a conservative stance within guidance."
The analyst said Netflix raising prices wouldn't come as a surprise as the streaming company is now at a lower price point for rival ad-supported plans and in line with most rival ad-free plans.
"We believe raising prices on both the ad-supported and standard price plans could alleviate concerns about ad ARPU dilution and support 2025 revenue growth in the low-teens."
Other areas to watch in Netflix's upcoming report include the AdTech stack progress of the company's proprietary platform, an update on advertising revenue and margins, according to the analyst.
"Unless there is a price increase or a material net add slowdown, we do not expect much reaction on this print. Most investors we speak with are comfortable with Netflix's competitive position and aware that content catalysts are coming."
NFLX Price Action: Netflix stock is down 0.60% to $705.02 on Tuesday versus a 52-week trading range of $344.73 to $725.56. Netflix stock is up 50% year-to-date in 2024.
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