Netflix (NASDAQ: NFLX) reached a new all-time high on December 11, trading as high as $940 after J.P. Morgan (NYSE: JPM) raised its price target for the streaming giant from $850 to $1,010.
The upgrade was attributed to robust subscriber growth, surging advertising revenue, and compelling content, with the investment bank reaffirming an “overweight” rating for the stock.
As of the market close on December 10, NFLX shares were trading at $936.56. The streaming service has recorded an impressive 99% gain year-to-date (YTD), with 44% of this growth being achieved in the past six months alone, solidifying Netflix’s position as one of the standout performers among mega-cap stocks in 2024.
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Reasons behind the target upgrade
JPMorgan’s price target increase is backed by several growth drivers, including a revised estimate for Q4 net subscriber additions to 10 million, up from a previous forecast of 9 million.
The bank pointed to data from Sensor Tower, which highlighted significant improvements in global download volumes and daily active user trends throughout Q4, driven by Netflix’s strong content lineup and year-end programming.
These trends are supported by organic subscriber growth and increasing contributions from the ad-supported tier, all of which are expected to drive Netflix’s revenue growth through 2025.
JPMorgan remains confident in Netflix’s ability to sustain its market leadership and long-term growth trajectory.
Expanding the ad-supported model
Netflix’s advertising business has emerged as a significant revenue driver, gaining momentum since the introduction of its ad-supported plan in late 2022.
Priced at $6.99 per month, the plan targets budget-conscious viewers and competes with other ad-based streaming platforms. Recently, Netflix began phasing out its $11.99 basic ad-free plan in the U.S., giving customers the option to switch to premium tiers or opt for the lower-cost ad-supported alternative.
Analysts view this strategic shift as a catalyst for financial growth, with the potential to attract incremental subscribers and boost the average revenue per user (ARPU).
Citi, reflecting confidence in the company’s advertising tier, raised its price target for Netflix to $920. The firm noted that multiple expansions, driven by growing investor confidence in the ad-supported tier, have been a primary factor in Netflix’s equity returns this year.
Content success fuels engagement
Netflix’s success is also heavily tied to its ability to deliver compelling content and expand into live entertainment. Shows like Squid Game have demonstrated the platform’s global appeal.
The first season of the South Korean hit attracted over 142 million households within its first four weeks and contributed an estimated $900 million in impact value. With the second season of Squid Game set to premiere on December 26, subscriber engagement is set to rise significantly.
The company’s recent live sports ventures have also shown promise. Its first-ever live sports broadcast, featuring Jake Paul and Mike Tyson, broke records with 65 million viewers, boosting Netflix’s market cap by $25 billion.
Moreover, Netflix has plans for the Christmas Day football games, featuring marquee matchups like the Pittsburgh Steelers vs. the Kansas City Chiefs.
However, many are cautiously optimistic, hoping these broadcasts won’t suffer from the technical issues that plagued the Jake Paul vs. Mike Tyson fight, raising questions about the platform’s ability to smoothly handle live sporting events.
Moreover, the crackdown on password sharing has seemingly paid off in a big way, driving significant subscriber growth and boosting revenue streams for Netflix.
Analysts outlook and market performance
Netflix’s financial performance continues to impress analysts. In Q3, the company reported earnings per share (EPS) of $5.40, surpassing Wall Street expectations of $5.09, and revenue of $9.82 billion, slightly ahead of forecasts.
With a nearly 100% rise in its stock price in 2024, Netflix has outperformed rivals like The Walt Disney Company (NYSE: DIS), which posted year-to-date gains of 26.14%.
Analysts expect Netflix’s focus on advertising revenue, monetizing password sharing, and delivering unique content experiences to drive sustained growth.
As Netflix continues to expand its offerings, the company could reach new milestones, including the ambitious goal of becoming a trillion-dollar company, as predicted by analysts.
Featured image from Shutterstock.
