Netflix’s Path To $1,100 Gets A Boost With Rising Paid Members

Summary:

• I reiterate my “buy” rating on Netflix with a price target of $1,107, representing a 20% upside from current levels.
• In Q3 FY24, Netflix demonstrated its commitment to continue investing in its content slate across TV shows, movies, games and live events to boost user acquisition and engagement.
• With its Paid Memberships growing 14.4% YoY, its UCAN segment drove most of the revenue and ARM growth, while its operating margins expanded at the same time.
• Looking forward, the management is optimistic about Net paid Adds in Q4 given its strong content slate, while revising their FY24 revenue and earnings guidance higher.
• With membership from its ad-supported tiers growing at 35% QoQ, it promises tremendous potential as Netflix builds their advertiser offering, boosting ARM and unlocking operating leverage.

Introduction & Investment Thesis

I initiated a “buy” rating on Netflix, Inc. (NASDAQ:NFLX) on September 29 with a price target of 904, which represented an upside of 27-28% from the price at publication.

Since then, the stock has climbed over 30%, exceeding

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in NFLX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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I am Amrita and I write primarily about growth software stocks. 

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