Oppenheimer analysts on Monday reiterated their positive stance on Netflix (NASDAQ:NFLX) shares, encouraging investors to buy the recent pullback.
The investment bank points to NFLX’s clear revenue drivers through 2026, including subscriber growth, potential price increases, and advertising monetization.
“While NFLX has already won the streaming wars, eventual consolidation will drive more viewership to NFLX, with ~12% viewing share likely up for grabs from consolidation driving margin leverage,” analysts said.
According to Oppenheimer, Netflix's significant content lineup is expected to bolster viewership in the second half of the year. The streaming giant's library, which keeps churn at low levels, will be strengthened by the return of popular series such as "Squid Game," "Cobra Kai," and "Emily in Paris." Netflix's strong performance is also reflected in its viewership metrics, with the company achieving its largest-ever U.S. TV viewership share in June.
Analysts also forecast a decrease in competition as the market cannot sustain an unlimited number of streaming platforms. With approximately 12% of U.S. TV viewership spread across several platforms, including Disney+, Hulu, and others, the firm anticipates that not all of these services will survive the next four years, potentially benefiting Netflix with a higher return on content investment.
For 2024, subscriber growth is identified as the key driver for Netflix, with an expected 11.5 million net additions in the second half of the year. This is projected to drive a 14% revenue growth. Despite this focus on subscriber numbers, Netflix plans to cease reporting subscriber figures in 2025 as growth normalizes.
Looking ahead to 2025, price increases are expected to be a significant growth driver for Netflix. With the last U.S. Standard tier price increase occurring in January 2022, and peers having raised prices by an average of 39% since then, Oppenheimer thinks Netflix has the pricing power to implement a broad price increase of approximately 15%, which could result in an 8% rise in average revenue per member for the fiscal year 2025.
For fiscal 2026, analysts highlighted that Netflix expects advertising will be the "primary contributor" to revenue growth. They estimate that advertising could account for 70% of the incremental revenue that year, assuming monetization aligns with Standard Plan levels, consistent with the company's long-term target.