On Thursday, UBS reaffirmed its Buy rating on Netflix (NASDAQ:NFLX) shares, maintaining a price target of $685. The streaming giant recently secured a deal with the NFL to broadcast Christmas day games, a strategic move that is expected to bolster subscriber engagement and strengthen the company's advertising business.
The agreement with the NFL will include at least one game each year for the next three years, with plans to air two games in 2024. This addition follows Netflix's recent partnership with WWE, marking the company's continued investment in live sports content. The UBS analyst views these deals as a means to drive further engagement and to provide Netflix with more leverage in its pricing and advertising strategies.
Netflix's venture into tier 1 sports rights is seen as a significant step, signaling a positive outlook for the rights marketplace. The company's management has indicated that the costs associated with NFL rights are included within the projected $17 billion cash content spend for the year. Despite this substantial investment, Netflix is still targeting a 25% operating margin for 2024, as previously forecasted.
The move to acquire NFL rights is also seen as a shift in the distribution of premier programming, traditionally dominated by the conventional TV ecosystem. With these sports rights, Netflix is expected to offer an alternative platform for marquee sports content, potentially attracting a new segment of viewers.
The UBS analyst's comments underscore the potential for these sports deals to enhance Netflix's content offering and to contribute to the company's long-term financial goals. The steady price target suggests confidence in the company's strategy and its ability to execute on these new content initiatives.
InvestingPro Insights
As Netflix continues to expand its content library with strategic sports deals, it's important to consider the company's financial metrics and analyst sentiment. According to InvestingPro data, Netflix has a market capitalization of $264.61 billion, with a P/E ratio of 41.73, reflecting a market that values the company's growth prospects. The company's revenue growth for the last twelve months as of Q1 2024 stands at 9.47%, indicating a steady increase in its top line.
An InvestingPro Tip highlights that 25 analysts have revised their earnings upwards for the upcoming period, signaling optimism in Netflix's future performance. This aligns with UBS's reaffirmed Buy rating and suggests that the market shares this positive outlook. Another InvestingPro Tip points out that Netflix is trading at a low P/E ratio relative to near-term earnings growth, which could indicate that the stock is undervalued given its growth trajectory. For those interested in further insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/NFLX.
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