MW Netflix has won the streaming wars. Now what?

By Lukas I. Alpert

Analyst firm MoffettNathanson is raising its price target for Netflix, saying it sees huge upside for the platform's new advertising model as well as continued profit-margin growth

If Netflix Inc. has already won the streaming wars, where can it go from here?

Research group MoffettNathanson sees only upside ahead for the streamer to monetize its recently added advertising tier and for continued profit-margin growth in the years to come.

The analyst firm said it's raising its price target for Netflix shares $(NFLX)$ by $250, to $1,100 a share, and lifting its rating from neutral to buy.

"Netflix has won the streaming wars. Case closed. But where does the company go from here?" the research firm wrote in a note to clients. "The short answer: There's lots of runway ahead."

The key to Netflix's continued growth is the development of its ad-supported subscription offering, the note said.

The lower-priced package - which costs $7.99 a month, versus $24.99 a month for a premium ad-free package - has enabled Netflix to attract a large number of customers who may have been put off by the higher price point, the analyst said.

Netflix added a record 41 million new subscribers globally last year.

But as the ad-supported package develops, MoffettNathanson sees Netflix generating $6 billion in annual ad revenue alone by 2027, and as much as $10 billion by 2030.

As for Netflix's core ad-free subscription package, MoffettNathanson sees that the company is under-earning on the basis of revenue per hour viewed, specifically in the U.S. market. That gives the company a lot of room to increase revenue, the analysts noted.

Netflix earns 40 cents per hour viewed, the analysts said, which is substantially lower than the 87 cents earned by Warner Bros. Discovery Inc.'s (WBD) Max and Discovery+ services along with its linear HBO offering, and also lower than the 86 cents taken in by Paramount Global's (PARA) $(PARAA)$ Paramount+ offering.

"WBD and Paramount+ may be over-earning, but looking at Netflix through this lens they are arguably under-earning today relative to the value they deliver to consumers," the note said.

While Netflix will see additional costs in building out its ad-supported service and in generating more extensive content as its audience grows, the company could see profit-margin growth as high as 40% by 2030, the analysts said.

MoffettNathanson noted that Netflix's revenue and margin growth had already shown up in the numbers and said there was little reason to think it wouldn't continue.

"Netflix posted +16% revenue growth for the year, more than double the pace of the prior two years, and operating margins expanded over +600 [basis points] to nearly 27%, or almost +300 bps higher than its guidance at the outset of the year," the note read.

Even amid global macroeconomic uncertainty, MoffettNathanson said, Netflix's addition of a lower-priced, ad-supported tier would help reduce churn going forward if customers decide the higher-priced tier is too expensive, as it allows them to downgrade rather than cancel their subscription entirely.

-Lukas I. Alpert

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March 17, 2025 20:33 ET (00:33 GMT)

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