Netflix Stock Surges on Strong Financial Results, Projected Growth

Netflix (NFLX) stock is experiencing a significant surge today, as it is up over 12% to $552.63 following the release of its impressive Q4 2023 financial results. However, analysts estimate that NFLX stock has the potential to rise even further, possibly reaching $625 or more. This projection is based on the company’s strong free cash flow (FCF) expected over the next 12 months.

In previous Barchart articles, Mark R. Hake, CFA had already highlighted Netflix’s remarkable FCF. Netflix reported that its FCF reached $6.925 billion for all of 2023, representing 20.5% of its total revenue of $33.725 billion for the year. Analysts project that Netflix’s revenue will continue to increase, with estimates of $42.60 billion in 2025. This suggests that NFLX stock could potentially hit $40 billion in revenue, resulting in a run-rate increase of approximately 18.6% and a FCF of $8.21 billion.

As a significant portion of revenue comes from new memberships and ad revenue, analysts expect that the company’s FCF margin will continue to grow over time, leading to higher FCF. This estimate of $8.2 billion FCF has substantial implications for NFLX stock. Using a 3.0% FCF yield metric, the stock could see a substantial increase in value. This projection is based on dividing the estimated FCF of $8.21 billion by 3.0% or multiplying it by 33.33. Therefore, NFLX stock could potentially be worth 27% more than its previous price, resulting in a price target of $625.08 per share.

With this impressive FCF, it is likely that analysts will revise their price targets for NFLX stock. Prior to the release of the Q4 2023 results, the average price target among 42 analysts surveyed by Barchart was $492.19. However, it is expected that these targets will see a significant increase following the remarkable financial results.

Netflix’s strong FCF is expected to result in a considerable increase in NFLX stock price. Analysts anticipate that the stock value could reach $625.08 per share, marking a 27% increase. The company’s impressive financial performance and projected growth make it an attractive investment option.