On Wednesday, Evercore ISI raised its share price target for Netflix (NASDAQ:NFLX) shares to $640 from $600, while maintaining an Outperform rating. This adjustment comes as a result of the firm's latest consumer surveys in the United States and Japan, which indicate varying trends in Netflix's performance in these markets.
The surveys, which included 1,300 U.S. respondents and 1,600 from Japan, revealed neutral trends for the core Netflix service in the U.S. but showed modestly positive trends in Japan.
The Subscription- and Advertising-based Video on Demand (SAVOD) model was highlighted as a key factor in driving new subscriber additions for Netflix, as well as serving as a tool to reduce subscriber churn in the U.S. market.
Furthermore, the concept of Paid Sharing, particularly in international markets like Japan, was noted to have significant potential. It is expected to continue contributing to subscriber growth. The surveys also pointed out that the enforcement of Paid Sharing among Mobile-Only Netflix users could provide a substantial boost to subscriber additions over the coming quarters.
In light of these findings, Evercore ISI has increased its fiscal year 2025 estimates for Netflix's revenue, operating income, and earnings per share by 2%. The new price target of $640 is based on a multiple of 28 times price-to-earnings (P/E), 23 times enterprise value to EBITDA (EV/EBITDA), and 33 times price to free cash flow (P/FCF) on the firm's 2025 estimates.
According to Evercore ISI, this represents a nearly 10% upside to the consensus 2025 earnings per share estimates for Netflix.
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