Jefferies Financial Group Inc. Maintains "Buy" Rating on Netflix (NFLX.US); Pricing Power and Advertising Business Support Long-Term Growth

Jefferies Financial Group Inc. maintains a "Buy" rating on Netflix (NFLX.US) with a target price of $85, which is 20% above the latest closing price. The firm believes that the streaming giant still has significant room in monetization, margin expansion, and stock buybacks to support sustained earnings growth. Jefferies Financial Group Inc. expects Netflix's revenue to achieve 11% annual growth from 2026 to 2029. The momentum comes from subscriber growth, price increases, and the advertising business. The firm estimates that Netflix's average revenue per member will grow 6% annually over the next three years. Advertising revenue is expected to climb from $3 billion in 2026 to $7.5 billion in 2029. Pricing power is a key pillar of Jefferies Financial Group Inc.'s bullish stance on Netflix. Jefferies Financial Group Inc. notes that in the U.S. market, on a price-per-viewing-hour basis, Netflix's standard plan is about 60% cheaper than competitors' services. This means the company still has room for further price increases. Jefferies Financial Group Inc. forecasts that, driven by improved content cost efficiency and advertising growth, the company's annual operating margin will expand by about 190 basis points by 2029. Over the next three years, Netflix's free cash flow is expected to exceed $50 billion. These funds can also be used for stock buybacks. Recently, concerns about Netflix's user engagement trends and potential acquisitions may weigh on investor sentiment. However, Jefferies Financial Group Inc. expects the outlook to become clearer before 2027, which would help drive valuation multiple expansion. It is reported that Netflix will release its earnings after the market closes on October 20, U.S. Eastern Time. The market expects revenue of $12.878 billion, up 11.89% year-over-year; earnings per share of $0.823, up 40.15% year-over-year.