Ad-tier and paid sharing helped Netflix (NFLX) outperform since July
By Sam Boughedda
Morgan Stanley analysts raised the firm’s price target on Netflix (NASDAQ:) to $275 from $250 per share, telling investors in a note that the launch and potential of the ad-tier and paid sharing have helped Netflix shares nicely outperform since July.
They maintained an Equal-Weight rating on the stock, which is down over 52% this year.
“We see growing risk market expectations for the ad-tier and paid sharing to pay quick dividends in net adds and ARPU are already priced in,” said the analysts. “Consensus expects net adds to grow from less than 6mm in ’22 to 15mm/16mm in ’23/’24, respectively, while ALSO generating MSD ex-FX ARPU growth.”
In addition, the firm believes there is improved content efficiency, with revenue growing faster than content costs, which is a “necessary driver for further outperformance and support a premium multiple.”
“At nearly 30x forward earnings and 22x our ’23E EBITDA, investors may be playing for the bull case. We see a healthy but maturing top-line growth over the next few years. As a result, to avoid multiple compression we are looking for Netflix to better leverage its content investment to drive strong operating leverage,” added the analysts.
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