Netflix (NASDAQ: NFLX) shares surged more than 3% in the regular trading session on Monday after MoffettNathanson upgraded the stock to Buy from Neutral.
In a note released Monday, analyst Michael Nathanson raised the price target by $250 to $1,100, citing the company’s ability to ‘better monetize its engagement’ and unlock new revenue streams.
MoffettNathanson believes Netflix has already “won the streaming wars” but still has room for growth.
The analyst explained that Netflix’s large subscriber base gives it a competitive edge.“Because Netflix has more subscribers to spread its content spending across, it can afford to spend more on content,” he wrote. This approach drives better engagement, attracts more subscribers, and may even boost pricing power.
According to MoffettNathanson, Netflix’s ad-supported tier is one of the biggest drivers of its future growth. The firm considers this tier a “lower-cost option” that expands Netflix’s total addressable market while creating “a dual revenue stream model with the addition of advertising.”
The firm estimates Netflix (NASDAQ: NFLX) will generate over $6 billion in ad revenue by 2027, with that figure expected to rise to nearly $10 billion by 2030.
The analyst also sees strong profit potential ahead, estimating Netflix will achieve “margin expansion of at least +200 bps per year.” This could lift operating margins to 40% by 2030, with even more growth potential.
Despite earlier concerns about subscriber saturation, analysts now say Netflix is “underearning relative to its engagement.” They believe the company can raise prices to reflect this untapped value.
The firm values Netflix at 29.5 times its estimated 2027 earnings per share. Analysts believe this “updated valuation approach appropriately captures this growth.”
The upgrade reflects optimism about Netflix’s subscriber growth, fast-growing ad business, and sustained margin improvements. MoffettNathanson raised its estimates, betting big on the margin expansion story.
