Itau BBA on Netflix (NFLX): 'Our conclusion is that solid fundamentals are present, but lackluster guidance raises concern'

Itau BBA analyst Stephano Gabriel reiterated an Outperform rating and $151.40 price target on Netflix (NASDAQ: NFLX).

The analyst comments "Negative. Netflix reported good earnings for the current quarter, but unimpressive guidance despite the strong content slate. If it were possible to look at the numbers without context, the conclusion would be a slight deceleration in revenue growth (+12~14% YoY in FY2026 vs. +16% in FY2025) and a continuing and impressive show of gains of scale (31.5% FY2026 operating margin vs. 29% in FY2025). But the context, or the equity story, is that of a company that is synonymous with its industry that has already penetrated major markets. The fact that it did not accelerate revenue growth when its content slate was strongest raise concerns that it could be close to its growth ceiling. The Warner acquisition, the industry’s largest and done by a company with an organic growth track record, only exacerbates concerns. The company is a very strong cash generator with FCF margin humming above 20% for 2025 and 2026. But with content investments running at ~40% of sales while growth slows down, capital allocation could be put in question. Companies must invest ahead of growth, and Netflix has a stellar track record, but worries intensify. To assuage fears of its growth engine sputtering out, the company talks about i) how linear TV still holds a lion's share of viewership in the US (42% in Dec. 2025) and abroad; ii) how Ads is doubling revenues YoY, potentially representing 6% of sales in 2026; iii) how engagement (view hours) grows 9% YoY for original content and 2% YoY on a consolidated basis; iv) and how all of that happens among steepening competition with YouTube, Instagram, digital games and other media platforms. All in, it still is a letdown. Our conclusion is that solid fundamentals are present, but lackluster guidance raises concerns for the long-term view. And the absence of information on the consolidation of Warner adds difficulty for short-term investors seeking triggers. There were positive announcements of a new mobile app interface, rollout of cloud gaming developments and growth across all regions (even penetrated ones like US and EMEA) but the overall conclusion is a negative one."

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $87.26 yesterday.

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