If you’re a streaming company planning to take on Netflix, analysts have got two words for you: good luck.
The company has come such a long way from those distant days of 1997 when Netflix (NFLX) was a mail-based DVD rental service.
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A decade later, Netflix launched its streaming service called “Watch Now” that offered a limited selection of 1,000 titles, as opposed to the 70,000 DVDs available at the time.
People kept on watching and now the company that began as an idea in a carpooling group is an entertainment heavyweight with over 300 million global subscribers, or roughly the population of these United States.
“Netflix has established a virtually insurmountable lead in the streaming wars,” Wedbush analysts wrote in an April 11 research note. “Netflix ended 2024 with a bang, but raised prices across its subscription tiers in Q1.”
Even as Netflix has lapped the password-sharing crackdown, Wedbush said the company it is introducing the extra member feature for the ad tier, providing another revenue growth opportunity alongside substantial price increases and global advertising expansion.
Netflix has ‘a virtually insurmountable lead in the streaming wars,’ firm says. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
Analyst: Netflix positioned for revenue and earnings beat
Netflix started cracking down on password sharing in May 2023, with the goal of ensuring accounts are used by people living in the same household.
The crackdown resulted in increased subscriber numbers and revenue.
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Wedbush maintained its outperform rating and $1,150 price target on Netflix, which is scheduled to post quarterly results on April 17.
The firm said the streaming giant is positioned to accelerate ad tier revenue contribution for the next several years by adding more live events, improving its advertising solutions and targeting, and broadening its content strategy.
“While massive subscriber growth was the primary driver in 2024, we expect price increases to drive revenue growth in 2025, and the ad tier to drive revenue higher in 2026,” Wedbush said. “As Netflix expands from here, its contribution margin can massively exceed our estimates, driving outsized free cash flow.”
With $18 billion in content spend across movies, high-demand serial content, games, and live events, Wedbush said there is meaningful upside potential to Netflix’s 2025 guidance.
Wedbush said Netflix is positioned for another revenue and earnings beat in the first quarter and maintained its quarterly revenue estimate of $10.86 billion compared the consensus of $10.52 billion and guidance of $10.42 billion.
President Donald Trump’s tariff turmoil has rocked the business world and analysts suggest that the entertainment sector could be affected.
Jeremy Roberts, head of TV & film at British legal firm Sheridans, wrote in Broadcast International that there is a very real risk that tariffs could cause a global recession.
“In a recession, advertising budgets are among the first things to be cut, which hits media companies that rely on ad revenues and leads to a drop in commissioners’ budgets,” he said.
Expert warns about economic uncertainty
Economic uncertainty also reduces consumer confidence, Roberts said, and. when consumer confidence drops, discretionary spending – on things like movie tickets and streaming subscriptions – tends to tightened.
“The tariffs could cause significant swings in foreign exchange rates, which can have profound effects,” he said.
Related: Netflix earnings on deck with live sports boost, price hikes in focus
JPMorgan addressed the tariff issue in a recent research note where the firm lowered its price target on Netflix to $1,025 from $1,150 and kept overweight rating on the shares, according to The Fly.
The firm said it reduced estimates, multiples, and price targets on 25 companies across its internet coverage based on the tariff impact, macro headwinds, and a potential recession.
JPMorgan said its economists suggest a 60% chance of recession in 2025 and that U.S. real GDP declines in the second half of 2025.
The firm said that it believes e-commerce, online travel, and digital advertising names are the most exposed.
Streaming subscriptions, cloud, and rides and food “should prove relatively more resilient,” JPMorgan predicted.
“There is no macro immunity in the Internet space, only degrees of resilience,” the firm said.
Meanwhile, Morgan Stanley named Netflix as new “Top Pick” in media and entertainment, displacing Disney (DIS) , as applying “a more defensive lens to our M&E coverage leaves us incrementally bullish on Netflix.”
The firm said that it expected Netflix to demonstrate relative resilience in a weaker global macro backdrop, arguing that momentum in its core subscription business, combined with recent U.S. dollar weakness, should de-risk FY25 estimates, even in a softer ad market.
Morgan Stanley has an overweight rating and $1,150 price target on Netflix shares.
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