-- Netflix (NFLX) is likely to see revenue growth in 2026 amid a significant boost from advertising, Wedbush Securities said in a Friday client note.
The brokerage expects Netflix's ad revenue this year to at least double to $3 billion, with "significant" growth opportunities in 2027 and beyond. Netflix said in January that it expects overall revenue of $50.7 billion to $51.7 billion this year, up 12% to 14% annually, with ad revenue anticipated to roughly double.
"Netflix should continue to gain incrementally from its ad business by expanding partnerships, improving targeting, leveraging (artificial intelligence), and adding more live content," Wedbush analyst Alicia Reese wrote in the note. "This year, we expect interactive ads and, ultimately, purchasing opportunities as Netflix leverages its vast data to enhance its performance marketing capabilities."
Netflix's churn rate is low due to the variety, quality, and depth of its content, Wedbush said, adding that this is "significant" for advertisers. The company could see higher average revenue per member starting in the second quarter, helped by its improving advertising strategy, the brokerage said.
Wedbush expects Netflix's first-quarter revenue of $12.22 billion, above Wall Street's view for $12.18 billion and the company's guidance of $12.16 billion. The brokerage expects earnings of $0.77 per share, while analysts polled by FactSet are anticipating $0.79 on a GAAP basis.
Netflix is scheduled to release its latest quarterly results on April 16.
The latest price increases implemented by Netflix could provide a "meaningful" boost to the streaming giant's profitability this year, the brokerage said. Last month, the company raised prices on all its plans in the US, including bumping its ad-supported standard tier to $8.99 per month from $7.99. The price of its standard plan without ads rose by $2 to $19.99 a month, while the premium tier now costs $26.99, compared with $24.99 previously.
Wedbush reiterated its outperform rating on the stock and raised its price target to $118 from $115.
Netflix may outperform its own guidance for the full year as the impact of the latest price increases takes hold, UBS Securities said in a separate note Thursday. Meanwhile, BofA Securities recently said the company's earlier-than-expected price increases highlight its pricing power.
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