Netflix (NFLX, Financial) is potentially entering a "valuation danger zone," according to KeyBanc analysts, who remain optimistic and have raised the company's price target. Netflix shares rose by 2.27% to $932.12. Analyst Justin Patterson maintained an "overweight" rating, increasing the target price from $785 to $1,000, a 9.4% increase from current levels. Despite this optimism, two warnings were issued: Netflix’s perceived victory in the streaming wars and its high valuation, with an enterprise value-to-sales ratio reaching nine times, historically indicating a peak.
Netflix is undergoing a significant business shift, focusing on total revenue growth rather than quarterly user metrics. The company is tackling password sharing by introducing a paid sharing model, expected to yield improvements by 2025. With a robust content lineup, including NFL games and popular original series sequels, Netflix is poised for growth.
KeyBanc predicts Netflix will transition from user growth to revenue growth by 2026. The potential for price increases and an untapped advertising business could further drive growth.
