UBS Raises Netflix Price Target to $1,495 on Strong Growth and Margin Outlook

UBS raised its price target for Netflix (NFLX, from $1,450 to $1,495 on Friday and kept its Buy rating. The streaming behemoth is still showing strong top-line growth and operating leverage. The company is close to its 52-week high and has a market cap of $515 billion, but other sites, including InvestingPro, say it might be a little overrated right now.

Netflix's revenue grew by 17% year over year in the second quarter, which was in line with expectations and somewhat higher than the 16% rise seen in the first quarter. Operating income rose 45%, exceeding analysts' projections of about 40%. Gross margins stayed the same at 48.49%.

The company said that its good performance was due to a lot of new subscribers at the end of the quarter, price increases, and more advertising. Management raised its forecast for FX-neutral sales growth for the whole year from 1417% to 1617%. The expectation for the operating margin was also raised to 30%, up from 29%. About half of the increase was due to positive FX moves.

UBS noted that the third quarter should do well because of new content like the second season of Squid Game and the return of Wednesday. They estimate revenue to climb by 17% and operating income to grow by 25% in Q3.

The advertising part of Netflix is still doing well, and revenue is on course to quadruple from last year. Management thinks that user engagement will go up in the second half of 2025, because to the company's growing library of content.