Buy Netflix: Expect 20% Rally, Needham Analyst predicts

The experts at Needham are predicting big things for Netflix in the coming months, pointing to strong trends in labor productivity as a key factor. With a buy rating on the stock, Needham has raised its price target to $1,500, representing a potential 19.9% increase from the previous day’s closing price.

Analyst Laura Martin highlighted the importance of employee quality and culture in driving financial returns, emphasizing that trends in labor productivity can indicate future share price performance. In fiscal 2024, Netflix boasted the highest revenue per full-time equivalent (FTE) at $2.78 billion, surpassing well-known peers like Apple, Meta Platforms, and Alphabet.

Moreover, Netflix’s free cash flow per FTE has seen a significant positive shift between fiscal years 2021 and 2024, increasing by $506,095 per FTE over the four-year period. Martin expects this positive trend to continue, driven by revenue growth outpacing FTE growth and supported by price hikes in its Subscription Video on Demand tier and ad revenue growth from its ad-driven tier.

Netflix’s stock has significantly outperformed the S&P 500 in recent months, with a more than 49% increase over the past six months and over 40% year-to-date. This bullish outlook is reflected in analyst ratings, with 34 out of 49 analysts covering Netflix giving it a strong buy or buy rating.

In summary, the future looks bright for Netflix, with a combination of strong labor productivity trends and positive financial indicators pointing towards continued growth for the streaming giant.