UBS Raises Price Target for Netflix to $560, Maintains Buy Rating
In a note issued on Thursday, UBS analysts raised their price target for streaming giant Netflix (NASDAQ:NFLX) to $560 from $500 per share while maintaining a Buy rating on the stock. The move reflects the bank’s optimism regarding Netflix’s potential to deliver robust performance in the coming quarters.
UBS analysts anticipate Netflix to have an accelerating revenue and operating income growth in the fourth quarter of 2023 and throughout 2024. As per the analysts, it is believed that Netflix stands to benefit significantly from the streaming industry, which is constantly changing its price increases, platform consolidation, reduced expenses, and its focus on licensing.
“We believe Netflix is the main beneficiary as the industry increases prices, consolidates platforms, cuts spending & renews focus on licensing, likely driving upside to estimates & the multiple,” said analysts in their notes.
For the fourth quarter, UBS expects Netflix to report similar subscriber additions compared to the previous quarter, with approximately 9.0 million new subscribers (compared to 8.8 million in the third quarter and 7.7 million a year ago). Additionally, they anticipate accelerating revenue and operating income growth, with an expected operating income of $1.2 billion compared to $550 million a year ago.
Looking ahead to the first quarter of 2024, UBS analysts project continued acceleration in revenue and operating income growth, with expectations of 14% and 28% growth, respectively. While subscriber growth is expected to be softer seasonally, the analysts still anticipate improvements year-over-year, with an estimated addition of 3.8 million subscribers compared to the Street’s estimate of 4.0 million.
One key factor driving growth in average revenue per membership in 2024, according to UBS, is paid sharing and a return to price increases. The analysts anticipate that the rollout of paid sharing will continue into the first quarter of 2024, contributing to increased revenue per membership.
UBS’s revised price target and positive outlook for Netflix underscore the streaming giant’s resilience and potential for continued growth amidst a rapidly evolving industry landscape. As competition intensifies and consumer preferences evolve, Netflix’s focus on content quality, pricing strategy, and technological innovation positions it favorably to capitalize on emerging opportunities.
Following the announcement, investors may closely monitor Netflix’s performance in the coming quarters to gauge its ability to execute its growth strategy and maintain its leading position in the streaming market.
As of the latest update, Netflix shares were trading in line with UBS’s revised price target, reflecting investor confidence in the company’s long-term prospects and growth trajectory.
