Netflix (NASDAQ: NFLX) has come a long way from sending out rental DVDs in those iconic red envelopes. Many criticized the company for moving away from DVDs at the start of the streaming video revolution. It turns out that Netflix had the last laugh. Analysts project that, as of 2024, its streaming video business will have nearly 300 million global subscribers and $40 billion in annual revenue, with a market cap approaching $283 billion.
Benjamin Swinburne of Morgan Stanley is especially bullish. He expects the company to generate industry-leading returns (over 20% ROIC in 2024) and approach $7 billion in free cash flow.
Although sometimes faltering, most recently, at the start of 2022, NFLX shares have followed that steady upward climb. It reaped big rewards during the pandemic when the nation was in lockdown and people binge-watched their favorite films and TV shows.
A History Of Resilience
Although Netflix led the way in the new streaming industry, competitors like Amazon Prime Video, Hulu, Apple TV+, HBO Max, and Disney+ began appearing. It was a battle for content rights and subscribers. Netflix has experienced remarkable growth since 2010, defying skepticism from industry leaders like Time Warner's former CEO Jeffrey Bewkes. He was skeptical of the company’s business plan to pay considerably for film and TV streaming rights. Netflix prevailed.
The company took a hit at the start of 2022, with experts believing that its growth trajectory had ended. Some thought that market saturation and the number of competitors would make Netflix obsolete. The company responded by focusing on revenue growth rather than just the number of subscribers. There was some pushback about this pivot, but Netflix was right, and its stock recovered.
An Upward Trajectory?
Netflix faces continued challenges and fierce competition from traditional media and social media outlets. However, Swinburne believes Netflix is "in a league of its own," citing robust international content and deep user engagement.
Despite intense competition, Swinburne maintains an Overweight (Buy) rating on Netflix stock and has raised his price target from $700 to $780, implying a 19.5% upside. The overall analyst consensus on Netflix is a Moderate Buy, with 23 Buys, 12 Holds, and 1 Sell rating. The average price target among analysts is $673.89, suggesting limited near-term upside potential for the stock.
More movement may be forthcoming. Netflix will report its Q2 earnings after the bell on Thursday.
Julie Stoller does not have positions in this company. Stocks.News has positions in Netflix.
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Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...