Netflix raised at Piper Sandler: 'Multiple levers to support continued momentum'
Investing.com -- Piper Sandler upgraded Netflix (NASDAQ:NFLX) to Overweight from Neutral, citing multiple growth opportunities and an attractive long-term outlook for the streaming giant.
The firm raised its price target for Netflix to $800 from $650, emphasizing the company's leadership in the streaming industry.
In their note, analysts highlighted that while Netflix's valuation is high, it's "expensive for a reason."
Piper Sandler sees several growth drivers for Netflix, particularly in its non-ad-supported business, where pricing power remains strong.
"With more pricing power, subs growth doesn't need to be as high as it has been to support double-digit revenue growth," the analysts wrote.
They noted that Netflix could return to regular price increases in key markets, particularly as its content slate strengthens.
Another key point was the potential of Netflix's ad-supported tier, which the firm said has been "de-risked heading into next year."
Piper Sandler believes that reaching critical mass by 2025 is an important milestone, especially as Netflix partners with third-party DSPs.
"Hitting critical mass in 2025 is a major milestone in our view," they wrote, indicating that this could lead to positive surprises in 2025.
In terms of profitability, Piper Sandler believes that Netflix's margin outlook could be conservative, particularly for 2025 and 2026. The firm expects non-content costs to grow at half the rate of revenue growth over the next few years, supporting further margin expansion.
As streaming continues to dominate television viewing, with Netflix leading at 20% of streaming time, Piper Sandler is confident in the company's ability to maintain its leadership in the sector. The analysts see a strong long-term outlook for Netflix as it continues to execute on its strategy.
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