© Reuters. Netflix (NFLX) shares rally as Morgan Stanley ups value goal, cites rising confidence in return on content material spending
Netflix (NASDAQ:) shares jumped greater than 3% Monday after Morgan Stanley raised its value goal for the inventory to $550 from $475 per share.
NFLX shares are buying and selling across the $488 mark on the time of writing.
Analysts on the funding financial institution cited the Chubby-rated firm’s “attractive risk/reward,” its elevated confidence in Netflix’s return on content material spending, execution on development initiatives, together with paid sharing and promoting, and the pull-back in aggressive depth in broader Media.
Morgan Stanley additionally famous that Netflix has begun hedging forex, which it expects will raise earnings, though they word that the affect of FX strikes can be delayed in reported outcomes.
“We continue to see NFLX shares as offering an attractive risk/reward as we raise our estimates and PT to $550, which implies shares trade at 26x our 2025E EPS, as we continue to forecast a 25-30% EPS CAGR over the next four years,” stated the funding financial institution.
“Our earnings outlook has increased on the stronger USD since our October upgrade. There is a high 70-80% flow-through of FX moves to EBIT given the cost base of Netflix,” they added.
Moreover, Morgan Stanley stated it’s elevating its internet provides forecast for Netflix “modestly” in 2024 and past, as they see the mixed advantages of unique programming energy and aggressive withdrawal benefiting member development at Netflix.
The funding financial institution believes Netflix’s “unmatched scale” and FCF era opens up new alternatives for the enterprise, noting that the streaming big is 2 years into its gaming investments and “the benefits of these investments have yet to be material but offer upside in the future.” On the identical time, the corporate can be “increasingly able to optimize its content spending with new options around licensing.”
