J.P. Morgan: Netflix Inc. — More Meat & Potatoes Than Sizzle, But We'd Buy Weakness; Reiterate Overweight & $118 PT
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J.P. Morgan maintains an Overweight rating on Netflix with a December price target of $118, slightly reduced from $120, following first-quarter results that exceeded expectations but did not prompt upward revisions to full-year guidance. The firm advises investors to buy weakness, noting that while Netflix delivered solid financials, the decision to maintain its 12–14% revenue growth guidance disappointed some market participants.
Operating margin expansion faced temporary pressure from accelerated content amortization and the early recognition of InterPositive operating costs and M&A expenses. Consequently, expense growth is heavily weighted toward the first half of 2026. However, J.P. Morgan expects expense growth to decelerate to roughly 7% in the second half, enabling operating profit growth to exceed 30% driven by recent price increases.
Engagement quality metrics reached all-time highs, aided by the World Baseball Classic and popular new series, even as total viewing hours grew only 2% year-over-year. Advertising remains a significant growth catalyst, with ad-tier revenue projected to surpass $3 billion in 2026 and potentially exceed 10% of total revenue by 2027 or 2028. The firm's target price implies approximately 30 times its 2027 GAAP EPS estimate of $3.92. This premium valuation is justified by projected 2025–2028 compound annual growth rates of 12% for revenue, 21% for operating profit, and 24% for EPS.