Analyst Jason Helfstein from Oppenheimer remains bullish on Netflix Inc (NASDAQ:NFLX), emphasizing an Outperform rating with a target of $515. This projection comes as Netflix experiences multiple growth drivers, many of which Helfstein believes investors might be undervaluing.
In his assessment, Helfstein recognizes the potential in paid sharing and advertising strategies, anticipating they could heighten revenues by an impressive ~40% against FY22 figures. Delving into the specifics, he believes revenues from these tactics will see an uptick from 1% in the second quarter to an estimated 17% by FY25. This growth trajectory is supported by recent data which indicates that such approaches are effective in attracting new subscribers.
What’s compelling is Helfstein’s projection that by the close of FY25, Netflix might reclaim about 46% of an estimated 100 million account sharers. Given that an initial rollout of paid sharing garnered approximately 6 million subscribers within a month, there’s reason to believe that his forecast of net additions (~24 million) for FY24 could actually be conservative.
Breaking down the numbers further, between core growth mechanisms and the new tactics of paid sharing and advertising, Netflix is on track to secure an additional 63 million subscribers by FY25 when compared to FY22. This would mean a 27% increase in total subscribers, and an 11% rise in average revenue per membership (ARM).
Additionally, Helfstein projects that from FY22 to FY25, the GAAP operating income will grow at a compound annual rate of 27%. This suggests that the absolute number for FY25 will be a whopping 107% higher than the FY22 figure.
On the stock front, there has been a ~15% dip since the 2Q report, which Helfstein considers to be a window of opportunity for investors. Despite a conservative adjustment in his forecasts — a decrease in his FY24E and FY25E revenue predictions by 2%, and a downward revision in his net adds projections by 1.7 million and 4 million — his overall outlook remains positive. He also made modest adjustments to his Q3 and Q4 revenue and EPS expectations.
As the market responded to these insights, NFLX shares surged by 4.60%, reaching $432.15 during the last check on Wednesday.
