Netflix’s Growth Outlook: Analyst Forecasts 431 Million Subscribers by 2033 but Raises Concerns
Benchmark analyst Matthew Harrigan has reiterated his Sell rating on Netflix Inc (NFLX) and maintained a price target of $545. While Harrigan’s forecast predicts Netflix reaching an impressive 431 million global members by 2033 with a 35%+ operating margin, he acknowledges potential risks to this ambitious target.
Harrigan believes that Netflix’s member growth could face headwinds in the intermediate term, potentially leading to a downward revision of his forecast. He highlights the sensitivity of his projection to the ten-year member installed base and the company’s ability to maintain its operating margin. Despite his bullish long-term outlook, he acknowledges that achieving such growth may prove challenging in a rapidly evolving streaming landscape.
While acknowledging that Netflix operates more as a media company than a tech giant, Harrigan’s $545 valuation reflects a fair 18.2 times 2025 EBITDA multiple and a fair 14.1 times target EBITDA multiple even in 2033. He expects top-line and profitability growth to increasingly rely on pricing strategies and new initiatives like AVOD (ad-supported video on demand) and gaming as volume growth slows down.
Harrigan emphasizes the importance of pricing announcements for Netflix’s future success. He believes that to justify the current stock price of ~$715, Netflix would need to achieve a 5.5% pricing CAGR through 2033, a feat he considers challenging given consumer resistance to price hikes and the concentration of member growth in emerging markets with lower price points.
Benchmark’s baseline forecast incorporates a 35%+ operating margin, which Harrigan considers more secure than the member forecast. He notes that advertising revenue, while growing, is still in its nascent stage, with the ability to monetize rapidly expanding inventory lagging behind scaling momentum. He also emphasizes the importance of paid sharing and AVOD contributions to future growth, while acknowledging the impact of currency fluctuations on Netflix’s financial performance.
Looking ahead, Harrigan highlights Netflix’s ongoing efforts to construct its in-house ad tech platform for a broad launch in 2025. The company will continue to collaborate with Microsoft’s Xandr on the supply side of the ad market. He also mentions Netflix’s ongoing testing of a simplified and more intuitive TV home page aimed at enhancing content discovery, particularly by genre.
Harrigan’s analysis also reflects the growing competitive landscape in the streaming market, referencing an article in The Telegraph about the UK streaming market and efforts by the public BBC and other broadcasters to compete with Netflix, including the possibility of opening up the BBC’s iPlayer to include shows from other UK channels.
For the third quarter, Harrigan projects revenue of $9.79 billion and EPS of $5.18. As of Tuesday, NFLX stock was down 0.66% at $708.30.
While Harrigan maintains a bullish outlook on Netflix’s long-term potential, his concerns over member growth and the need for aggressive pricing strategies highlight the challenges the streaming giant faces in sustaining its current momentum and achieving its ambitious growth targets.
