Analyst Predicts Major Decline for Netflix Amid Growth Risks

In the United States, Benchmark analyst Matthew Harrigan has reiterated a Sell rating for Netflix Inc. with a price target of $545. He projects that Netflix will reach approximately 431 million global members by 2033, with an operating margin exceeding 35%. Harrigan expressed concerns about potential risks to member growth, particularly in the intermediate term, and highlighted the importance of pricing strategies and new initiatives like advertising-supported video on demand (AVOD) and gaming. He noted that Netflix's current stock price of around $715 would require a significant pricing compound annual growth rate (CAGR) of 5.5% through 2033, despite challenges such as consumer resistance to price increases and competition from lower-priced markets. The analyst's forecast also indicates that Netflix's revenue and profitability growth will increasingly depend on these pricing strategies and new offerings, as traditional volume growth begins to slow. Harrigan emphasized that the advertising revenue potential is still in its early stages, with Netflix working on its in-house ad tech platform for a broader launch in 2025, while continuing to collaborate with Microsoft’s Xandr. As Netflix prepares to report its earnings, the market is particularly focused on any announcements regarding price hikes. Harrigan's estimates for the third quarter of 2024 include projected revenue of $9.79 billion and earnings per share of $5.18. The analyst's insights reflect a cautious outlook on Netflix's future growth amid evolving market dynamics and competitive pressures. Overall, Harrigan's analysis suggests that Netflix faces significant challenges in maintaining its current valuation and achieving its long-term growth targets, particularly in light of changing consumer preferences and market conditions.