Netflix and Roku's Long-Term Growth Potential
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Should l Buy NFLX?
Source: Fool
- Netflix Market Share: Despite generating $45 billion in annual revenue, Netflix captures less than 10% of total TV viewing time in major markets, indicating substantial growth potential; if it can incrementally expand its market share, it could significantly enhance revenue per member and margins, driving long-term returns for shareholders.
- Profitability Targets: Netflix's management is guiding for a 31.5% operating margin by 2026, suggesting the company can grow earnings per share at double-digit rates, particularly through premium memberships and ad-supported subscription plans, where ad revenue doubled in 2025.
- Roku Advertising Market Opportunity: Roku's stock has risen 86% over the past three years, indicating its potential as ad spending shifts to streaming platforms, which are still in the early stages; the ad spending has yet to align with the time users spend on Roku, presenting a vast growth opportunity.
- Platform Revenue Growth: Roku's revenue increased by 17% year-over-year in Q3, showcasing its strong ad technology and appeal to advertisers, particularly in measuring sales conversions and click-through rates, leading investors to view Roku favorably despite its current sales multiple of just 3.4 times, suggesting underestimation of its growth potential.
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Analyst Views on NFLX
Wall Street analysts forecast NFLX stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NFLX is 129.47 USD with a low forecast of 92.00 USD and a high forecast of 152.50 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
38 Analyst Rating
27 Buy
9 Hold
2 Sell
Moderate Buy
Current: 83.490
Low
92.00
Averages
129.47
High
152.50
Current: 83.490
Low
92.00
Averages
129.47
High
152.50
About NFLX
Netflix, Inc. is a provider of entertainment services. The Company acquires, licenses and produces content, including original programming. It provides paid memberships in over 190 countries offering television (TV) series, films and games across a variety of genres and languages. It allows members to play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time. The Company offers members the ability to receive streaming content through a host of Internet-connected devices, including TVs, digital video players, TV set-top boxes and mobile devices. It is engaged in scaling its streaming service, such as introducing games and advertising on its service, as well as offering live programming. It is developing technology and utilizing third-party cloud computing, technology and other services. The Company is also engaged in scaling its own studio operations to produce original content.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Netflix's Strong 2025 Performance Faces Streaming Challenges
- Significant Revenue Growth: In 2025, Netflix's revenue increased by 16% year-over-year to $45.2 billion, with operating income soaring by 28%, indicating the company's strong fundamentals amidst fierce competition in the streaming market.
- Slow User Growth: Despite reaching 325 million subscribers, Netflix's share of total TV viewing time only rose from 7.5% to 8.6%, a mere 15% increase compared to the overall streaming market's 52% growth, highlighting increasing market pressure.
- Intensifying Competition Warning: Competitors like YouTube are surpassing Netflix in user engagement, and the company's insufficient investment in live sports may put it at a disadvantage in the battle for viewer attention, a concern noted by management.
- Acquisition Intentions: Netflix plans to acquire HBO Max and Warner Bros.' content catalog for an enterprise value of $82.7 billion, aiming to enhance its market share and viewer engagement, although future growth may face more challenges.
See More
Netflix Rated Among Most Profitable NASDAQ Stocks
- Rating Upgrade: Freedom Capital Markets upgraded Netflix's stock from Hold to Buy with a price target of $104, reflecting market confidence in its future growth, particularly after the company’s fourth-quarter results exceeded Wall Street estimates.
- Strong User Growth: Netflix's membership increased by 8% to 325 million by late 2024, demonstrating its appeal and user retention in the global market, which further solidifies its market leadership.
- Surge in Advertising Revenue: The company reported over $1.5 billion in advertising revenue for the fourth quarter, growing more than 2.5 times, which not only enhances its overall revenue structure but also provides strong support for future profitability.
- Acquisition Agreement Revision: Netflix announced a revision of its acquisition agreement with Warner Bros. Discovery to an all-cash transaction at $27.75 per share, aimed at eliminating competitive acquisition threats and securing its market position.
See More
Warren Warns of Risks from ESPN's NFL Asset Acquisition
- Acquisition Impact: The approval of ESPN's acquisition of NFL media assets is expected to lead to higher costs and fewer viewing options for NFL fans, with Senator Warren strongly opposing this move, arguing it further solidifies ESPN's dominance in the sports streaming market.
- Programming Expansion: With this acquisition, ESPN will broadcast 28 regular-season games annually, marking its highest total ever, while integrating parts of NFL Network into its direct-to-consumer service, which is anticipated to enhance user experience and market competitiveness.
- NFL's Control: Despite ESPN's acquisition of certain NFL Network assets, the NFL will continue to operate NFL+ and NFL.com, retaining production control over RedZone, thereby ensuring its influence amid shifting media landscapes.
- Disney Earnings Highlights: Disney reported adjusted earnings of $1.63 per share, exceeding analyst expectations, with revenue climbing 5% year-over-year to $25.98 billion, indicating a positive impact of the ESPN acquisition on its overall business.
See More
Netflix and Roku's Long-Term Growth Potential
- Netflix Market Share: Despite generating $45 billion in annual revenue, Netflix captures less than 10% of total TV viewing time in major markets, indicating substantial growth potential; if it can incrementally expand its market share, it could significantly enhance revenue per member and margins, driving long-term returns for shareholders.
- Profitability Targets: Netflix's management is guiding for a 31.5% operating margin by 2026, suggesting the company can grow earnings per share at double-digit rates, particularly through premium memberships and ad-supported subscription plans, where ad revenue doubled in 2025.
- Roku Advertising Market Opportunity: Roku's stock has risen 86% over the past three years, indicating its potential as ad spending shifts to streaming platforms, which are still in the early stages; the ad spending has yet to align with the time users spend on Roku, presenting a vast growth opportunity.
- Platform Revenue Growth: Roku's revenue increased by 17% year-over-year in Q3, showcasing its strong ad technology and appeal to advertisers, particularly in measuring sales conversions and click-through rates, leading investors to view Roku favorably despite its current sales multiple of just 3.4 times, suggesting underestimation of its growth potential.
See More
Investors Underestimating Shift Away from U.S. Assets, Warns Tuttle
- Market Shift Warning: Matthew Tuttle, CEO of Tuttle Capital Management, warns that investors may be underestimating the shift away from U.S. assets, particularly large tech firms, as Europe and other regions reduce dependence on American platforms and policies.
- Digital Sovereignty Push: Tuttle highlights a significant move towards digital sovereignty in Europe, ensuring that core systems and communications cannot be easily disabled if relations with the U.S. deteriorate, which will impact future technology procurement and investment decisions.
- Beneficiary Companies: He identifies several European companies, including OVH Groupe, IONOS, Orange, Deutsche Telekom, and Capgemini, that could benefit from this shift, indicating a market tilt towards local technology solutions.
- Strained U.S.-EU Relations: Relations between the U.S. and EU have further strained after President Trump threatened tariffs on the EU for not supporting his Greenland acquisition bid, which may intensify scrutiny on U.S. tech companies and affect investor confidence.
See More
Market Dynamics: Key Earnings and Hearings Ahead
- Earnings Reports: Tomorrow, several companies including AMD, Chipotle, Pfizer, and Merck will release their earnings reports, with analysts expecting AMD to perform strongly in Q4, although GPU profits may not materialize until the second half of 2026.
- Chipotle Sales Outlook: Despite heavy promotions, analysts anticipate a dip in same-store sales for Chipotle, and margins may tighten due to discounts and rising costs, impacting overall performance.
- Pharmaceutical Sector Updates: Merck, Pfizer, and Amgen are set to report earnings before the market opens, and investors will closely monitor these results to gauge the overall health of the pharmaceutical industry.
- Netflix Hearing: Netflix co-CEO Ted Sarandos will testify at a Senate hearing tomorrow at 2:30 PM regarding the proposed acquisition of Warner Bros. Discovery, which could significantly influence the company's future strategy.
See More
Netflix's Strong 2025 Performance Faces Streaming Challenges
- Significant Revenue Growth: In 2025, Netflix's revenue increased by 16% year-over-year to $45.2 billion, with operating income soaring by 28%, indicating the company's strong fundamentals amidst fierce competition in the streaming market.
- Slow User Growth: Despite reaching 325 million subscribers, Netflix's share of total TV viewing time only rose from 7.5% to 8.6%, a mere 15% increase compared to the overall streaming market's 52% growth, highlighting increasing market pressure.
- Intensifying Competition Warning: Competitors like YouTube are surpassing Netflix in user engagement, and the company's insufficient investment in live sports may put it at a disadvantage in the battle for viewer attention, a concern noted by management.
- Acquisition Intentions: Netflix plans to acquire HBO Max and Warner Bros.' content catalog for an enterprise value of $82.7 billion, aiming to enhance its market share and viewer engagement, although future growth may face more challenges.
See More
Netflix Rated Among Most Profitable NASDAQ Stocks
- Rating Upgrade: Freedom Capital Markets upgraded Netflix's stock from Hold to Buy with a price target of $104, reflecting market confidence in its future growth, particularly after the company’s fourth-quarter results exceeded Wall Street estimates.
- Strong User Growth: Netflix's membership increased by 8% to 325 million by late 2024, demonstrating its appeal and user retention in the global market, which further solidifies its market leadership.
- Surge in Advertising Revenue: The company reported over $1.5 billion in advertising revenue for the fourth quarter, growing more than 2.5 times, which not only enhances its overall revenue structure but also provides strong support for future profitability.
- Acquisition Agreement Revision: Netflix announced a revision of its acquisition agreement with Warner Bros. Discovery to an all-cash transaction at $27.75 per share, aimed at eliminating competitive acquisition threats and securing its market position.
See More
Warren Warns of Risks from ESPN's NFL Asset Acquisition
- Acquisition Impact: The approval of ESPN's acquisition of NFL media assets is expected to lead to higher costs and fewer viewing options for NFL fans, with Senator Warren strongly opposing this move, arguing it further solidifies ESPN's dominance in the sports streaming market.
- Programming Expansion: With this acquisition, ESPN will broadcast 28 regular-season games annually, marking its highest total ever, while integrating parts of NFL Network into its direct-to-consumer service, which is anticipated to enhance user experience and market competitiveness.
- NFL's Control: Despite ESPN's acquisition of certain NFL Network assets, the NFL will continue to operate NFL+ and NFL.com, retaining production control over RedZone, thereby ensuring its influence amid shifting media landscapes.
- Disney Earnings Highlights: Disney reported adjusted earnings of $1.63 per share, exceeding analyst expectations, with revenue climbing 5% year-over-year to $25.98 billion, indicating a positive impact of the ESPN acquisition on its overall business.
See More
Netflix and Roku's Long-Term Growth Potential
- Netflix Market Share: Despite generating $45 billion in annual revenue, Netflix captures less than 10% of total TV viewing time in major markets, indicating substantial growth potential; if it can incrementally expand its market share, it could significantly enhance revenue per member and margins, driving long-term returns for shareholders.
- Profitability Targets: Netflix's management is guiding for a 31.5% operating margin by 2026, suggesting the company can grow earnings per share at double-digit rates, particularly through premium memberships and ad-supported subscription plans, where ad revenue doubled in 2025.
- Roku Advertising Market Opportunity: Roku's stock has risen 86% over the past three years, indicating its potential as ad spending shifts to streaming platforms, which are still in the early stages; the ad spending has yet to align with the time users spend on Roku, presenting a vast growth opportunity.
- Platform Revenue Growth: Roku's revenue increased by 17% year-over-year in Q3, showcasing its strong ad technology and appeal to advertisers, particularly in measuring sales conversions and click-through rates, leading investors to view Roku favorably despite its current sales multiple of just 3.4 times, suggesting underestimation of its growth potential.
See More
Investors Underestimating Shift Away from U.S. Assets, Warns Tuttle
- Market Shift Warning: Matthew Tuttle, CEO of Tuttle Capital Management, warns that investors may be underestimating the shift away from U.S. assets, particularly large tech firms, as Europe and other regions reduce dependence on American platforms and policies.
- Digital Sovereignty Push: Tuttle highlights a significant move towards digital sovereignty in Europe, ensuring that core systems and communications cannot be easily disabled if relations with the U.S. deteriorate, which will impact future technology procurement and investment decisions.
- Beneficiary Companies: He identifies several European companies, including OVH Groupe, IONOS, Orange, Deutsche Telekom, and Capgemini, that could benefit from this shift, indicating a market tilt towards local technology solutions.
- Strained U.S.-EU Relations: Relations between the U.S. and EU have further strained after President Trump threatened tariffs on the EU for not supporting his Greenland acquisition bid, which may intensify scrutiny on U.S. tech companies and affect investor confidence.
See More
Market Dynamics: Key Earnings and Hearings Ahead
- Earnings Reports: Tomorrow, several companies including AMD, Chipotle, Pfizer, and Merck will release their earnings reports, with analysts expecting AMD to perform strongly in Q4, although GPU profits may not materialize until the second half of 2026.
- Chipotle Sales Outlook: Despite heavy promotions, analysts anticipate a dip in same-store sales for Chipotle, and margins may tighten due to discounts and rising costs, impacting overall performance.
- Pharmaceutical Sector Updates: Merck, Pfizer, and Amgen are set to report earnings before the market opens, and investors will closely monitor these results to gauge the overall health of the pharmaceutical industry.
- Netflix Hearing: Netflix co-CEO Ted Sarandos will testify at a Senate hearing tomorrow at 2:30 PM regarding the proposed acquisition of Warner Bros. Discovery, which could significantly influence the company's future strategy.
See More
