Netflix receives Street-high target at Pivotal Research

Investing.com -- Pivotal Research lifted its price target on Netflix (NASDAQ: NFLX) shares to $1,600, the highest on Wall Street, citing greater confidence in the company’s long-term market position and stronger valuation metrics.

The broker shifted its discounted cash flow (DCF) model to a year-end 2026 horizon and increased its terminal 2030 EBITDA multiple from 20x to 21x.

“Our positive NFLX investment view remains unchanged,” analysts at Pivotal Research wrote, noting that Netflix “remains underpenetrated globally” and offers a “compelling price to entertainment value.”

The ad-supported tier is seen as a key driver of both subscriber and average revenue per unit (ARPU) growth, particularly as the platform continues to implement price hikes and expand its advertising capabilities.

Pivotal’s analysis points to results and guidance from the last 18 months as clear evidence of Netflix’s market dominance and increasing scale.

While rivals in the streaming space continue to post substantial losses and rely on aggressive pricing strategies, Netflix is generating strong free cash flow (FCF) and making strategic investments in sports and live content, including the Tyson/Paul fight, WWE programming, Christmas NFL games, and a potential deal for Formula 1 rights in the U.S. and Latin America.

Analysts also expect Netflix to benefit from rivals offloading premium library content.

“We believe other streaming players/media players will have no choice, but to continue to sell their premium library content to NFLX,” the note said, adding that Netflix’s global reach of roughly 700 million viewers improves content value and franchise longevity.

Pivotal reiterated its Buy rating and described Netflix as “the world’s dominant premium streaming entertainment service,” suggesting that management’s reported goal of reaching a $1 trillion valuation by 2030 remains “reasonable.”

The brokerage emphasized that scale remains Netflix’s core advantage and encouraged the company to continue leveraging its platform to grow both its subscriber base and ARPU.

It also sees potential for acquisitions to deepen the company’s competitive moat, naming assets such as movie studios, sports leagues, and video game properties as strategic targets, though the analysts point out that these deals could face regulatory hurdles.

“We also believe AI has the potential to significantly improve their video content, while also reducing the cost of such programming although this is not built into our estimates,” the team continued.

Moreover, they highlighted long-term upside, citing Netflix’s estimate that it holds just 6% of global entertainment revenue (excluding China) and 10% of viewing share. A potential stock split in 2025 was also mentioned.

While bullish on long-term growth, the note flagged several risks, including a $22 billion content obligation, the transition to ad-supported models, inflation in content costs, and the company’s decision to stop reporting subscriber numbers.

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