Netflix (NFLX) Could Get 3x the Advertising ARPU of Hulu Says Atlantic After Upgrades Shares

September 28, 2022 8:45 AM EDT
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Price: $281.17 -1.53%

Rating Summary:
    35 Buy, 29 Hold, 6 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 12 | Down: 17 | New: 16
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Atlantic Equities analyst Hamilton Faber upgraded Netflix (NASDAQ: NFLX) shares to Overweight as he believes the revenue opportunity from the upcoming ad-supported tier isn’t reflected in the price.

Faber sees Netflix being in a position to generate revenues of $8 billion in 2025, which could potentially account for up to 20% of total revenues at that point.

“Some subscribers will downgrade to the cheaper ad-supported tier, but we believe Netflix's high viewership means any "downgrade" will be extremely accretive to overall ARPU due to high ad rates. We now estimate Netflix's US ARPU could almost double over the next three years,” Faber explained in a client note.

The new rating also reflects raised 2024 EPS estimates, which now sit at $14.14 (up from $12.71), while 2025 estimates are also hiked. The new price target of $283 implies a 26% upside potential from current levels.

This marks the fourth upgrade for Netflix this month after Oppenheimer, Evercore ISI, and Macquarie all moved a step higher on their respective rating scale.

Netflix shares are up over 1% in pre-open Wednesday. The NFLX stock is down 2.5% in September, although outperforming the S&P 500 by around 5.5%.

By Senad Karaahmetovic

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