Jefferies maintains Netflix's (NFLX.US) “buy” rating pricing power and advertising business supports long-term growth

The Zhitong Finance App learned that Jefferies maintains a “buy” rating for Netflix (NFLX.US), with a target price of $85, which is 20% higher than the latest closing price. The bank believes that the streaming giant still has plenty of room for monetization, profit margin expansion, and share buybacks, which can support continued profit growth.

Jefferies expects Netflix's revenue to grow 11% per year from 2026 to 2029. The impetus comes from subscriber growth, price increases, and advertising business. The bank estimates that the average revenue per Netflix member will increase by 6% per year for the next three years. Ad revenue is expected to rise from $3 billion in 2026 to $7.5 billion in 2029.

Pricing power is a key pillar for Jefferies to be bullish on Netflix. Jefferies notes that in the US market, Netflix's standard package is about 60% cheaper than competitors' services in terms of price per hour of viewing. This means that the company still has room to raise prices further.

Jefferies predicts that the company's annual operating profit margin will grow by about 190 basis points by 2029, driven by improved content cost efficiency and advertising growth. Netflix's free cash flow is expected to exceed $50 billion over the next three years. This money can also be used for share buybacks.

Recently, concerns about Netflix user engagement trends and potential acquisitions may dampen investor sentiment. However, Jefferies anticipates that the outlook for 2027 will be brighter, which will help drive the expansion of the valuation multiples.

According to reports, Netflix will release its earnings report after the market on October 20, EST. The market expects revenue of 12.888 billion US dollars, an increase of 11.89% over the previous year; earnings per share are 0.823 US dollars, an increase of 40.15% year on year.