Jefferies has reiterated its Buy rating on Netflix (NFLX.US), with a price target of $85, implying roughly 20% upside from the latest closing price.
The firm believes the streaming giant still has substantial room in monetization, margin expansion, and share buybacks to support continued earnings growth.
Jefferies expects Netflix's revenue to grow 11% annually from 2026 to 2029, driven by subscriber growth, price increases, and its advertising business.
The firm estimates that average revenue per member will rise 6% each year over the next three years, while ad revenue could climb from $3 billion in 2026 to $7.5 billion in 2029.
Pricing power is a key pillar of Jefferies' bullish case on Netflix. Jefferies notes that in the U.S. market, Netflix's standard plan is about 60% cheaper per hour viewed than competing services, suggesting the company still has room to raise prices further.
Jefferies forecasts that annual operating margin will expand by about 190 basis points by 2029, helped by greater content cost efficiency and advertising growth.
Over the next three years, Netflix's free cash flow is expected to exceed $50 billion, and these funds could also be used for share buybacks.
Recently, concerns about Netflix's user engagement trends and potential acquisitions may have weighed on investor sentiment. However, Jefferies expects the outlook to become clearer before 2027, which could help drive valuation multiple expansion.
Netflix is scheduled to report earnings after the close on October 20, U.S. Eastern Time. The market expects revenue of $12.878 billion, up 11.89% year over year, and earnings per share of $0.823, up 40.15% year over year.
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