Netflix Stock Soars on Strong Q4 Results, Fueled by Massive Free Cash Flow

Netflix (NFLX) stock is experiencing a significant surge, with a gain of over 12% to $552.63, following the release of its extraordinary Q4 2023 results. However, experts believe that NFLX stock holds even greater value, potentially reaching $625 or more due to its robust free cash flow (FCF) projections over the next 12 months.

Mark R. Hake, CFA, highlighted the substantial FCF potential in his recent Barchart articles, including ones published on Jan 7, 2024, and Dec 12, 2023.

Yesterday, Netflix reported that its FCF reached an impressive $6.925 billion during 2023, which accounted for 20.5% of its total revenue of $33.725 billion. With analysts projecting an optimistic 16% increase in revenue for the next year and projected revenues of $42.60 billion by 2025, Netflix could be on track to achieve $40 billion in revenue. This represents an 18.6% increase on a run-rate basis, implying that FCF could potentially reach $8.21 billion if the FCF margin remains flat at 20.5%.

The continually rising FCF has significant implications for NFLX stock. By utilizing a 3.0% FCF yield metric, experts estimate a substantial increase in the stock’s price. The $8.21 billion FCF estimate divided by 3.0% would result in a potential market capitalization of $273.7 billion or a multiplier of 33.33. This suggests that NFLX stock could be worth 27% more than its previous closing price of $492.19, with a revised price target of $625.08 per share.

As a result, analysts are likely to raise their price targets. Before the release of the Q4 results, the average price target provided by 42 analysts surveyed by Barchart, a new sell-side analyst tracking service, was [previous average price target]. Expect these target prices to increase significantly within the coming week.

The bottom line is that Netflix’s impressive FCF can potentially drive a significant increase in NFLX stock’s price, positioning it for even greater success in the market.