Focus on accelerating new growth momentum KeyBanc raises Netflix (NFLX.US) price target to $1000.

Netflix (NFLX.US) stock price may be entering the "valuation danger zone," but KeyBanc analysts remain optimistic and have decided to raise the company's target price. On Tuesday, Netflix rose 2.27% to $932.12. Analysts led by Justin Patterson maintained a "overweight" rating on Netflix shares and raised the target price from $785 to $1000, a 9.4% increase from the current level. However, for investors, this upward revision comes with two warnings. The first is about market narratives, that Netflix has emerged as the biggest winner in the war between cable TV and streaming; the second is about valuation issues. Analysts point out that Netflix's enterprise value-to-sales ratio has reached 9 times, which historically suggests that the company is nearing its valuation peak. "At present, we believe the market consensus is 'Netflix has already won' and 'traditional media is facing challenges,'" the analyst wrote. "Historically, the combination of valuation and narrative poses higher risks for investors." Nevertheless, the analyst still raised Netflix's target price and maintained its rating. "Although this suggests that investors may have already factored in recent momentum, we believe Netflix has several reasons to outperform the S&P 500 index by 2025." Firstly, Netflix's business is undergoing a "significant transformation." In April, the company announced in its shareholder letter that it will no longer report quarterly paid subscriber numbers or average revenue per user, showing a strategic shift from focusing on quarterly net user additions to total revenue growth. This shift began when Netflix started cracking down on password sharing in 2023. However, Netflix later introduced a share payment model, allowing account holders to pay extra to provide services to members outside the household. KeyBanc expects this strategy to drive improvement by 2025. With the increase in audience numbers, Netflix's monetization opportunities are also growing. The analyst pointed out that Netflix is about to have its "strongest content lineup ever," including the return of NFL games and "Squid Game 2," as well as sequels to several popular original works. KeyBanc also noted that some major drivers of growth come from industry-wide trends rather than factors controlled by Netflix itself. For example, compared to competitors (such as Peacock, Walt Disney Company, and Paramount), users in the streaming industry have clearly shifted towards Netflix. Netflix accounts for 50% of direct-to-consumer video revenue. Netflix is no longer satisfied with just making movies and TV shows. In 2024, the company further entered the field of live shows, marking a shift from scripted content libraries to live content. For example, "The Roast of Tom Brady" comedy special and the boxing match between Jake Paul and Mike Tyson, the latter attracting real-time attention from 60 million households. Despite buffering and latency issues during live broadcasts, this event still sparked massive audience interest, showcasing Netflix's new ambition to disrupt the media landscape. Netflix responded enthusiastically on social media, calling the event "dominating social media, breaking records, and even making our buffering system 'shaky.'" In the future, Netflix will launch more live shows, including Christmas NFL games and a weekly WWE show premiering on January 6, 2025. These signs indicate that Netflix is firmly turning towards the live field, which analysts believe will be a key driver of user engagement. KeyBanc is confident in Netflix's "clear growth algorithm" and expects the company to shift from user growth to revenue growth by the end of 2026. Furthermore, Netflix's advertising business has not yet fully tapped its potential, and analysts believe its revenue will be a "driving factor for 2026 and beyond," which could accelerate the company's growth rate. Meanwhile, there is still room for subscription price increases in multiple markets. Since January 2022, the company has not made significant price increases, indicating that Netflix management may choose this strategy in the future. "With the launch of more live shows, we believe the likelihood of price increases is increasing."