Netflix's Surging Ad Subscribers Ignite Optimism, Analyst Bumps Up Price Target By 26%

Zinger Key Points
  • Oppenheimer reiterates Netflix Outperform with target raised to $600; Ad MAUs surpass 23 million, signaling growth.
  • Netflix's accelerating subscriber base leads to raised revenue and EPS forecasts for FY24 and FY25.

Oppenheimer analyst Jason Helfstein maintained Netflix Inc NFLX with an Outperform and raised the price target from $475 to $600.

On Wednesday, NFLX’s President of Advertising announced ad Monthly Active Users (MAUs) >23 million vs. 15 million in November & 5 million in May, indicating an accelerating pace of ad subscribers. 

Near-term, the acceleration suggests 4Q net adds above guidance and Street. Over the medium-term, the analyst noted the pace of acceleration offers plenty of room for subscriber growth in 2024 and is conservatively raising his 4Q and FY24 net adds to +10 million and +24 million vs. prior +9 million and +21 million and Street’s +9 million and 18 million, respectively. 

Assuming year-end 2024 ad MAU of 50 million (~25 million subscribers), the analyst now estimates $40 billion and 46 billion of total revenue (+20% and +14% Y/Y) in FY24 and FY25 vs. Street’s $38 billion and $43 billion (+14% and +11%). 

Assuming cash content spend of $19.5 billion and $21 billion in FY25 and FY26 vs. $17 billion guidance, leaving ~$17.5 billion of cash after $14.5 billion of buybacks. 

The price target assumes 29x FY25 EPS vs. peers at 24x but is growing 32% faster. 

The analyst increased his FY24E and FY25 revenue by 3% and 5%, with subscribers 1% and 2% higher and average revenue per membership (ARM) 2% and 3% higher. 

The analyst also raised FY24 and FY25 EBITDA & free cash flow by 4% and 6%, with GAAP EPS by 5% and 7% higher. He also introduced FY26 estimates.

The analyst projected Q4 revenue and EPS of $8.7 billion (unchanged from prior vs. consensus of $8.71 billion) and $2.17 (prior $2.15 vs. consensus $2.21)

Also Read: Netflix Games Download Surge by 180%, Signaling Success in Gaming Expansion

Price Action: NFLX shares are trading lower by 0.05% at $492.01 on the last check Friday.

Photo by Kaspars Grinvalds on Shutterstock

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