- Macquarie Analyst Tim Nollen upgraded Netflix, Inc NFLX to Neutral by Underperform with a price target of $230 versus $170 as it gained confidence in Netflix’s ability to grow through advertising.
- Nollen is now more confident about the company’s longer-term upside potential.
- He estimates that by 2025, Netflix could generate up to $3.6 billion in revenue from advertising in the U.S. and Canada and $8.5 billion worldwide from advertising, for an additional $2 billion in total revenue.
- Nollen figured Netflix would ramp up its international ad sales efforts so quickly, considering the ad tier pulls an additional 10% for its EMEA, LatAm, and APAC subbase.
- While this may seem like a large number starting from zero, assuming a lower subscription price for the service and assuming that a third of all users migrate to the advertising tier, that equates to $1.1 billion in total revenue , just a 7% increase from estimates before accounting for ad growth.
- While Nollen’s assumptions appear aggressive, they demonstrate both the advertising opportunity and the appropriate offset to ARPU. In his model, international ad tiers only increase incremental revenue by $1 billion, or 4%.
- He maintained his estimates for 2022E-24E but increased estimates for 2025E.
- Price promotion: NFLX shares traded 4.73% higher to $228.70 on the last check Wednesday.
- Photo by Tumisu via Pixabay
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