Netflix 'Should Continue To Outperform': 6 Analysts On Streaming Stock's Q3 Earnings

Benzinga · 10/18 16:32

Netflix Inc (NASDAQ:NFLX) analysts are impressed with third-quarter results and strong subscriber additions. The company's fourth-quarter and 2025 guidance is leading to more bullish commentary from Netflix analysts and increased price increases after Thursday's results.

The Netflix Analysts:

  • Bank of America analyst Jessica Reif Ehrlich reiterated a Buy rating on Netflix and raised the price target from $740 to $800.
  • Macquarie analyst Tim Nollen maintained an Outperform rating with a $795 price target.
  • KeyBanc analyst Justin Patterson maintained an Overweight rating and raised the price target from $760 to $785.
  • JPMorgan analyst Doug Anmuth maintained an Overweight rating and raised the price target from $750 to $850.
  • Needham analyst Laura Martin maintained a Buy rating and raised the price target from $700 to $800.
  • Piper Sandler analyst Matt Farrell reiterated an Overweight rating and raised the price target from $800 to $840.

Bank of America on NFLX: The streaming company could have multiple drivers into 2025, Ehrlich said in a new investor note.

"In our view, Netflix remains one of the best-positioned companies within media and has several growth drivers, including the accelerating ramp of its burgeoning ad business," Ehrlich said.

The analyst said the ad-supported plan, gaming, live content and sports content are all multi-year growth drivers on top of the streaming company's "existing scale advantage."

"We believe that Netflix should continue to outperform."

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Macquarie on NFLX: Third-quarter results "largely beat expectations" with strong subscriber adds, revenue growth and operating margins, Nollen said in a new investor note.

The analyst said fourth-quarter guidance also looks solid with subscriber adds expected to rise on a quarter-over-quarter basis.

"The company is relying on big 4Q content releases like Squid Game 2, the Tyson/Paul fight, and the global NFL Christmas Day games," Nollen said.

Netflix's results were not all positive, with average revenue per member (ARM) flat in the third quarter, Nollen added.

"Netflix continues to undermonetize its ad tier and expand in lower-price countries."

Nollen also said a potential negative could be a lack of commentary on price increases in the U.S. for the ad-free plans, which many analysts expected.

"We think price increases to the ad tier are unlikely given Netflix's real need for scale in ad users to attract ad dollars."

KeyBanc on NFLX: The streaming giant could post future double-digit revenue growth after highlighting the strong third-quarter metrics and sharing updates on the ad-supported plan, Patterson said in a new investor note.

"With investments in 2025E likely to support monetization (both through price increases and advertising), we see potential for reaccelerating EPS growth into 2026E," Patterson said.

The analyst said 2025 revenue guidance of $43 billion to $44 billion could be an initial range to be revised higher next year.

Netflix's advertising business is not a primary driver and could be more of a 2026 story, Patterson added.

"2025 appears to get back to more balanced growth – Netflix expects 2025 revenue growth will be driven by a healthy increase in paid memberships and ARM. Our sense is that Netflix is alluding to raising price during 2025E."

JPMorgan on NFLX: Netflix remains a top pick for JPMorgan after the third-quarter results, and 2025 could bring "more balanced growth" with the ad-supported business scaling, Anmuth said.

"3Q upside combined w/the forward outlook should continue to move Street estimates higher," Anmuth said.  

The analyst said that while Netflix did not announce a price increase for the U.S. ad-free plan, the outcome is likely to occur in the first half of 2025.

"NFLX should have healthy organic & secular growth driven by strong content."

Anmuth expects Netflix to become the "default choice" for consumers when it comes to TV, film and long-form content engagement.

"We continue to believe the Jake Paul-Mike Tyson fight & the 2 NFLX Xmas Day games will be major ad events for NFLX, partly reflected in the 150%+ increase in upfront commitments."

Needham on NFLX: Strong net subscriber adds of 5.1 million, higher operating margins, revenue guidance raised and higher free cash flow guidance were highlights in the third-quarter report for Martin.

The analyst highlighted the company's disclosed metric of an average of two hours of viewing per member per day.

"Netflix believes (and we agree) that higher engagement correlates with higher sub retention, lower customer acquisition costs, and a higher perceived value of Netflix's content," Martin said.

Netflix's $6.99 ad-supported plan monthly cost in the U.S. is among the lowest prices in the streaming space and has the highest difference between the ad-free and ad-supported plans of the major streaming companies. Martin said this could help Netflix expand its market share in the ad-supported space.

Piper Sandler on NFLX: Netflix is setting up for a strong 2025, Farrell said in a new investor note.

"We were impressed with the company's execution, as Netflix delivered strong mid-teens revenue growth even as we lap tough comps," Farrell said.

The analyst said the top two highlights from 2025 initial guidance are subscriber growth, likely the biggest driver, and revenue hitting analyst estimates without a major price increase in North America for the ad-free plans.

"Netflix noted subscriber growth will be the primary growth driver next year, which we view as impressive given the favorable paid sharing trends in 2024."

Farrell said while the report and guidance was impressive, the company still has the future price increase catalyst coming.

NFLX Price Action: Netflix stock is up 10% to $758.43 on Friday versus a 52-week trading range of $392.26 to $761.87. Netflix stock is up 62% year-to-date in 2024.

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Photo courtesy of Netflix.