Words come back to haunt you. Take the case of Jeffrey Bewkes, who as CEO of Time Warner back in 2010 offered a disparaging take on Netflix (NASDAQ:NFLX), a $10 billion market cap company at the time. Assessing the hype around the future streaming giant, Bewkes said, “It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.”
Well, here we are in 2024, and the Albanian army has indeed not taken over the world. Yet, in contrast, it is a year Netflix could see out with almost 300 million global members and an annualized revenue of $40 billion. Not to mention, a market cap currently approaching $283 billion.
“As importantly,” says Morgan Stanley analyst Benjamin Swinburne, “it is generating industry leading returns (20%+ ROIC in ’24E) and approaching $7bn in FCF. Its victory over the traditional media companies, all of which are in some form or fashion attempting to build streaming businesses while their core linear business declines, is at hand.”
In fact, analyzing Netflix’ engagement data, and specifically highlighting the strength of international content and depth of consumption, Swinburne concludes Netflix is “in a league of its own.”
Does that mean no one can knock Netflix off its perch? Not necessarily. As its own business comes of age over the next few years, there are some big competitors waiting in the wings. Alphabet’s YouTube and Amazon’s Prime Video are obvious candidates who will look to take more share. Other less obvious sources vying for consumers’ eyeballs could also try to challenge its dominance. Social media comes to mind here, where short-form video has become increasingly popular.
And what about the prospect of another force gathering the troops for an assault on the streaming king’s castle? That is also a possibility. “There is the long-term risk that as its own margins build through outsized returns, a new Albanian Army or many assemble,” the 5-star analyst went on to add. “The potential for AI tools to dramatically reduce the barriers to entry in premium, professional video come to mind in this regard.”
As far as the stock is concerned, while Swinburne concedes that “much is priced in,” given the “still large opportunity for growth ahead,” he has raised his price target from $700 to $780, implying shares will gain another 19.5% over the coming months. Swinburne’s rating stays an Overweight (i.e., Buy). (To watch Swinburne’s track record, click here)
Most analysts back the Morgan Stanley view but not conclusively so. Based on a mix of 23 Buys, 12 Holds, and 1 Sell, the stock claims a Moderate Buy consensus rating. That said, going by the $673.89 average price target, the shares are expected to stay rangebound for the time being. (See Netflix stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
