Morgan Stanley: Netflix — Regaining the Crown: Valuation Has Bottomed at ~25-26x FY27 EPS vs. 5-Year Average of ~30x
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Morgan Stanley reaffirms an Overweight rating on Netflix (NFLX), raising its price target from $110 to $115, based on roughly 30x FY27 EPS of $3.85, implying 16% upside. The bull-case target increases to $155, implying over 55% upside. The report argues that Netflix shares have bottomed, with current valuations at approximately 25-26x FY27 EPS remaining attractive compared with the five-year average of roughly 30x.
Netflix commands approximately 200 billion annual viewing hours, benefiting from deep content breadth and live sports creating must-watch moments. Content cash spend has grown over eightfold since 2013 to $20 billion, while standard US plan pricing has only risen roughly 2.5x to $19.99, reflecting strong pricing power. Advertising revenue is projected to exceed $3 billion in 2026 and scale to $9-10 billion by 2030.
Artificial intelligence has shifted from a risk to an opportunity. The InterPositive acquisition is expected to reduce industry production costs by 10-20% and cut animation and VFX labor requirements by approximately 90%. Netflix leads peers in engagement per revenue, outperforming Disney DTC and Amazon Prime Video by roughly 30% in the US market.
Morgan Stanley projects sustainable double-digit revenue growth with EPS and free cash flow compounding at approximately 20% annually. EBIT margins could reach 40% by 2030. The firm raised FY27 EPS by 4% to $3.85, reflecting accelerated buybacks of $2 billion per quarter starting from Q2 and slower expense growth.