- Wednesday, October 16, 2024
Blowout Earnings Prompt Deutsche Bank to Reevaluate Netflix's Rating
Netflix, a leading streaming platform, experienced a remarkable surge in earnings. However, Deutsche Bank's latest report introduces a surprising downgrade in its rating for the company. While increasing the price target for Netflix from $460 to $525, the bank downgraded their rating from buy to hold.
As Netflix shares soared to $539 in premarket trade on Wednesday, Bryan Craft, an analyst at Deutsche Bank, acknowledged that Netflix remains the top contender in the media industry among vertically integrated producers, programmers, and distributors. However, Craft points out that the current stock price already reflects Netflix's leadership position. With Netflix trading at 32x 2024E / 27x 2025E EPS, there appears to be limited potential for further multiple expansion. Deutsche Bank predicts that 2024 will mark peak EPS growth at 38%, with a subsequent deceleration to 21% and 16% in 2025 and 2026, respectively.
Although the crackdown on account sharing could still yield some benefits for Netflix's 2024 results, the analyst suggests that the majority of low-hanging fruit has already been harvested. Meanwhile, advertising, though promising, is still in its early stages. Craft explains that the focus in 2024 will be on expanding the ads tier base and strengthening international sales efforts rather than achieving significant ad revenue growth.
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