Is Netflix Overpriced? Analyst Suggests Limited Room For Upside Despite Ad-Tier Opportunities

Morgan Stanley analyst Ben Swinburne reiterates an Equal-weight rating on Netflix Inc NFLX with a $350 price target.
The analyst highlights that NFLX is the streaming winner but priced as such, hence the re-rating.
He thinks that paid sharing and ad-tier opportunities are significant but appear largely captured in expectations and valuation, creating a balanced share risk and reward in an April 11 note titled "Netflix Inc: The Diplomat - Remain EW."
In his view, slower paid sharing rollout in 1Q may lead to net adds outperformance.
All else equal, Swinburne thinks that this suggests an upside to 1Q net adds guidance and expectations.
He notes that uncertainty around paid sharing timing creates a broader range of net adds outcomes than typical.
The analyst writes that NFLX's premium multiple reflects the expectation for accelerating top-line growth in 2H23. To support and expand that multiple, he focused on Netflix's ability to leverage content costs to drive margins.
With slowing cash content spend, he should have proof points around this opportunity later this year and in 2024.
Price Action: NFLX shares traded higher by 4.31% at $345.29 on the last check Thursday.
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