Argus Research has reiterated its BUY rating for Netflix Inc. (NFLX), raising the target price to $1,040 from $840, signaling a potential upside of approximately 18% from the current price of $881.05 (as of January 3, 2025). Netflix continues to capitalize on strategic initiatives like its advertising-supported tier, password-sharing crackdown, and foray into live sports programming. While the streaming giant faces stiff competition and cost challenges, its growth-oriented strategy and robust financial performance solidify its position as an industry leader. This article provides actionable insights into Netflix’s valuation, growth prospects, risks, and stock levels for investors.

Key Financial Metrics and Valuation

Revenue and EPS Growth

2024 Revenue: Estimated at $38.9 billion, up from $37.59 billion in 2023, reflecting steady growth.
2025 EPS: Forecasted at $23.28, a significant increase from $19.91 in 2024, indicating a robust 15% growth rate.
Current Valuation Metrics

Price-to-Earnings (P/E): 44.25 for FY24, indicating a premium valuation for its growth potential.
Enterprise Value/EBITDA: Forward multiple of 29.6, significantly above the peer average of 12, highlighting investor confidence in Netflix’s future earnings.
Market Performance
Netflix shares have outperformed the broader market, gaining 89% over the past year, compared to a 24% rise in the S&P 500. The stock has traded in the range of $466 to $942 over the last 52 weeks.

Business Drivers and Strategic Initiatives

Advertising-Supported Tier
Netflix’s low-priced advertising-supported plan, launched in late 2022, continues to gain traction. This initiative aims to attract cost-sensitive subscribers and diversify revenue streams. The advertising market is projected to ramp up further in 2025.

Password-Sharing Crackdown
The crackdown on password sharing, implemented in 2023, has successfully added subscribers, although the impact is starting to taper off. This move has significantly contributed to Netflix’s reaccelerated growth in user base and revenue.

Live Sports Programming
Netflix is venturing into live sports broadcasting, evidenced by its successful streaming of NFL Christmas Day games, which attracted over 24 million viewers. With future plans to stream WWE Raw matches, Netflix aims to enhance its appeal to advertisers by leveraging high-value live content.

Actionable Stock Levels

Key Levels to Watch

Support Levels: $850, $800
Resistance Levels: $900, $940
Fibonacci Retracement Levels
Using the 52-week high of $942 and low of $466, the Fibonacci levels are:

23.6% Retracement: $685
38.2% Retracement: $760
50.0% Retracement: $804
Actionable Insight
A sustained move above $900 could push the stock toward its new target of $1,040, while a drop below $850 may signal a correction to lower support levels.

Growth Opportunities and Competitive Landscape

Content Strategy
Netflix’s commitment to releasing original and buzzworthy content remains a cornerstone of its value proposition. The company continues to invest heavily in diverse genres to cater to its global audience.

International Expansion
With 59% of its revenue derived from outside the U.S., Netflix is aggressively scaling its operations in international markets, particularly in regions with high growth potential.

Competitive Risks
Netflix faces fierce competition from Disney+, Amazon Prime, and Apple TV, among others. Additionally, short-form video platforms like TikTok pose indirect challenges by capturing a significant share of consumer attention.

Risks and Challenges

Cost Pressures
Content production costs remain a critical concern for Netflix. Fixed-price content licenses and upfront payments for original programming could strain cash flow and profitability.

Regulatory and Cybersecurity Risks
With its global reach, Netflix must navigate complex regulatory landscapes and ensure data security. A successful cyberattack could severely impact its brand and subscriber base.

Subscriber Retention
The introduction of an ad-supported tier could cannibalize premium subscriptions, while rising competition might limit subscriber growth in mature markets.

Investment Outlook and Recommendation

Argus Target Price
Argus has raised its 12-month target price to $1,040, based on Netflix’s improving revenue and earnings growth. This represents an upside of 18% from the current price of $881.05.

Short-Term Strategy
Traders can consider entering near $880, targeting $940 in the short term, with a stop-loss at $850.

Long-Term Outlook
Investors with a long-term horizon can accumulate the stock on dips, leveraging Netflix’s strong fundamentals and growth trajectory.