On Friday, Evercore ISI reiterated its positive stance on Netflix (NASDAQ:NFLX) shares, maintaining an Outperform rating and a price target of $640. The firm anticipates that the streaming giant's first-quarter revenue growth of 13.6% year-over-year, operating margin of 26.0%, and earnings per share (EPS) of $4.51 align with current market projections.
Netflix's expected global net additions for the quarter stand at 4.7 million, a figure Evercore ISI views as attainable, though with some reservation about surpassing the investor expectation range of 7-9 million net additions.
The firm's analysis suggests that total viewing hours in the first quarter remained consistent with the previous quarter, indicating a stronger seasonal pattern compared to the last two years. Notably, the top five titles on Netflix, including "Fool Me Once" and "Avatar," experienced a combined increase in viewership.
Moreover, Evercore ISI's proprietary survey indicates potential growth opportunities as Netflix continues to expand its Paid Sharing feature, particularly among mobile-only users.
Looking ahead to the second quarter, Evercore ISI finds the Street's revenue growth estimate of 3% quarter-over-quarter to be reasonable. The firm expects Netflix to persist in implementing price increases throughout the year. The consensus estimate for global net additions in the second quarter is 4.3 million, which Evercore ISI regards as fair, taking into account various factors.
The second quarter will mark the commencement of Netflix's broad-based Paid Sharing rollout, which could impact subscriber growth. Still, the addition of "Sex and the City" to the Netflix library on April 1st and the release of "Bridgerton" Season 3 in two parts during May and June are viewed as positive content developments that could benefit the company.
InvestingPro Insights
Evercore ISI's optimistic outlook for Netflix is mirrored by some of the real-time data from InvestingPro. With a market capitalization of $269.54 billion, Netflix is a heavyweight in the entertainment industry.
The company's P/E ratio stands at a high 50.57, reflecting investor confidence in its future earnings potential, even as this valuation suggests that shares are trading at a premium relative to near-term earnings growth. The high P/E ratio is corroborated by the adjusted figure for the last twelve months as of Q4 2023, which is 49.84.
InvestingPro Tips indicate that Netflix is a prominent player in the entertainment industry, a factor that may continue to attract investor interest. Moreover, the company has been profitable over the last twelve months, with a robust operating income margin of 20.62% and a significant EBITDA growth of 22.47% in the same period.
These financial strengths are crucial as Netflix approaches its next earnings date on April 18, 2024. Netflix's strong return over the last three months, at 27.68%, and the impressive one-year price total return of 89.83%, highlight the company's recent market performance, which is trading near its 52-week high.
For investors seeking a deeper dive into Netflix's financials and market position, InvestingPro provides additional insights. With a total of 17 InvestingPro Tips available, including observations on the company's liquidity, debt levels, and valuation multiples, subscribers can gain a comprehensive understanding of the stock's potential. Interested readers can explore further by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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