Words can come back to haunt you. Consider the case of Jeffrey Bewkes, the former CEO of Time Warner. In 2010, he said: Netflix (NASDAQ:NFLX)At the time, the company was valued at $10 billion. Assessing the hype around the future streaming giant, Mr. Beukus said, “It’s like, is the Albanian army going to take over the world? I don’t think so.”
Now, as of 2024, the Albanian military certainly isn’t taking over the world. But by contrast, Netflix will likely get through the year with roughly 300 million subscribers worldwide and $40 billion in annual revenue, not to mention a market cap that’s now approaching $283 billion.
“Just as important,” says Morgan Stanley analyst Benjamin Swinburne, “the company is generating industry-leading profits (20%+ ROIC, 2024 forecast) and is approaching $7 billion in FCF, which puts it in a position to win against traditional media companies that are trying to build out all sorts of streaming businesses as their core linear businesses decline.”
Indeed, analysing Netflix engagement data, and particularly highlighting the strength of its international content and the depth of consumption, Swinburne concludes that Netflix is “in a league of its own.”
So does that mean no one can knock Netflix off its perch? Not necessarily. As Netflix’s business matures over the next few years, it has big competitors waiting in the wings. Alphabet’s YouTube and Amazon’s Prime Video are obvious contenders for market share. Other, less obvious sources of consumer attention could also try to challenge Netflix’s dominance. Social media comes to mind here, with the growing popularity of short-form video.
So what about the possibility that another power will gather an army to attack the streaming king’s castle? That’s a possibility. “There is a long-term risk that a new Albanian army, or even more so, will form as larger interests grow their own interests,” the 5-star analyst added. “This raises the possibility that AI tools could dramatically lower the barrier to entry for premium professional video.”
While Swinburne acknowledges that “much is priced in” for the stock, he raised his price target to $780 from $700, implying a further 19.5% upside in the coming months, as “there is significant growth opportunity ahead.” Swinburne maintains an Overweight (i.e. Buy) rating. (To watch Swinburne’s track record, click here)
The majority of analysts support Morgan Stanley’s view, but are not conclusive. Based on a combination of 23 Buys, 12 Holds, and 1 Sell, the stock has a Moderate Buy consensus rating. That said, judging by the average target price of $673.89, the stock is expected to remain range bound for the time being. Netflix stock price prediction)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, our tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is extremely important that you conduct your own analysis before making any investment.
