Needham analysts predict strong growth for Netflix in the upcoming months, bolstered by trends in labor productivity. The firm has updated its price target for Netflix’s stock from $1,126 to $1,500, suggesting a significant upside potential of nearly 20% from its recent closing price. Analyst Laura Martin highlighted the connection between employee quality, corporate culture, and financial returns, stating that patterns in labor productivity can serve as predictors of the company’s stock performance.
Notably, Netflix’s annual labor expenses exceed its $17 billion budget for content, emphasizing that efficient labor usage is crucial for financial success. Martin pointed out that Netflix leads its peers, such as Apple, Meta Platforms, and Alphabet, with an impressive revenue of $2.78 billion per full-time equivalent (FTE) in fiscal 2024. This figure almost doubles the average revenue per FTE of other large-cap companies within her coverage.
Furthermore, Netflix’s free cash flow per FTE has improved significantly, shifting from negative to positive, with an increase of over $506,000 per FTE from fiscal years 2021 to 2024. Martin anticipates this positive trajectory will continue, fueled by subscription price hikes and revenue growth in its ad-supported tier.
The company’s shares have surged significantly, outperforming the S&P 500, with over a 49% rise in the last six months compared to the S&P 500’s modest 8% increase. The investor sentiment remains hopeful, with 34 out of 49 analysts maintaining a strong buy or buy rating on Netflix stock, indicative of widespread confidence in its growth potential.
In light of these developments, Netflix appears well-positioned to harness labor productivity trends to drive further financial success, fostering a positive outlook for both the company and its investors.