Needham gives Netflix a chunky PT hike and maintains 'buy'

Needham has raised its price target for Netflix to $1,500, up from $1,126, anticipating significant revenue growth driven by Netflix's global reach and strategic service bundling, which is expected to lower customer turnover.

The firm revised its earnings projections for 2026, forecasting revenues of $49.9 billion and adjusted EBITDA of $16.3 billion, both exceeding previous estimates, and highlighting Netflix's commitment to substantial content investment and share repurchases.

Netflix's labor productivity is notably high, with a free cash flow per full-time employee of $494,416, significantly surpassing the average of large-cap companies, which is indicative of its operational efficiency relative to its peers.

The positive outlook is supported by factors such as Netflix's consistent content spending between $17 billion to $18 billion and its advertising initiatives aimed at boosting revenue and profit margins.

Recommendation Rating: Strong Buy

Needham has significantly raised its price target for Netflix (NASDAQ:NFLX), now set at a remarkable three-digit figure. The firm has also revised its earnings forecasts for the year 2026 upwards while reaffirming its optimistic outlook on the streaming behemoth.

Analysts, led by Laura Martin, underscore that Netflix's expansive global footprint is poised to enhance its revenue growth potential and bolster content investments. The strategy of bundling Netflix with additional services is anticipated to decrease customer turnover, while advertising initiatives are expected to drive revenue growth and enhance profit margins.

Needham expresses a favorable view on Netflix due to its consistent content expenditure, projected at approximately $17 billion to $18 billion. The firm highlights Netflix’s intention to utilize its increasing free cash flow (FCF) for share repurchases, which they believe will help stabilize the stock price and reduce investment risk.

Moreover, Needham draws attention to a relationship between labor productivity trends and stock price performance. They pointed out that Netflix’s annual labor expenses exceed its annual content investment of $17 billion.

For the fiscal year 2024, Netflix reported the third-highest free cash flow per full-time employee (FTE) at $494,416. In comparison, the average free cash flow per FTE among the large-cap companies analyzed by Needham was around $300,000, indicating that Netflix’s labor productivity is approximately 65% higher than that of its peers.

Looking ahead to fiscal year 2026, Needham anticipates that Netflix will generate revenues of $49.9 billion, representing a 12% increase year-over-year and exceeding prior estimates by 2%. They project adjusted EBITDA to reach $16.3 billion, reflecting a 15% year-over-year growth and surpassing previous forecasts by 3%. Additionally, they expect GAAP earnings per share (EPS) to hit $31.03, marking a 21% increase year-over-year and exceeding previous projections by 2%.

The new price target for Netflix is set at $1,500, an increase from the previous $1,126, suggesting a potential upside of 20%. The stock has risen 40% year-to-date, in contrast to the S&P 500, which has posted a nearly 7% increase over the same period.