20231103-招银国际-Entering_the_AVOD_space_37页_2mb

Netflix: BUY Recommendation with Target Price US$512

• Key Objectives:

  • Positive outlook on long-term subscriber trends, AVOD expansion, and margin expansion.
  • Initiates BUY after better-than-feared 3Q23 results, including strong net adds and FCF guidance.
  • Target price of US$512 reflects 33x forward P/E.

• Growth Drivers:

  • Overseas expansion: Expected 7.6% CAGR in subscribers, with APAC (ex-China) and EMEA markets driving growth.
  • AVOD rollout: Anticipated 51% CAGR, targeting 32mn subs by 2025E, boosting ARPU.
  • Paid-sharing initiatives: Potential 30mn add-on subs by 2025E, contributing 6% to revenue.

• Financial Highlights:

  • Revenue forecast: 6% YoY growth in 2023E to US$33.6bn, rising to US$41.5bn by 2025E (9% CAGR).
  • Subs growth: 7.6% CAGR, primarily from international markets and AVOD penetration.
  • Margin improvement: OPM expected to reach 24.6% by 2025E, driven by content rationalization and pricing power.

• Key Risks:

  • Subs churn due to price hikes or competition.
  • ARM dilution from AVOD mix and overseas expansion.
  • Intensified competition and macroeconomic uncertainty.

• Valuation and Catalysts:

  • DCF-based target price: US$512 (33x 2024E P/E).
  • Catalysts: Content production resumption post-strikes, resilient net adds, margin expansion from cost discipline.
  • Peer comparison: Premium valuation justified by leadership in streaming and original content.

• Market Position:

  • Global streaming leader with dominant subscriber base and content library.
  • Strong performance amid industry-wide price hikes and viewer shifts from traditional TV.