Netflix Inc. (NFLX) has agreed to fund a movie for $200 million, the highest single-movie budget ever for the popular streaming site.
According to a Deadline report on July 17, the movie will star Chris Evans and Ryan Gosling in a Russo Brothers’ directed movie called The Gray Man. The story is an action thriller where Gentry (Gosling), a former CIA agent, is being hunted around the world by another former CIA agent Lloyd (Evans). It is based on the 2009 Mark Greaney novel that turned into a bestselling book series.
The Russo Brothers (Anthony Russo and Joe Russo) have co-directed numerous Marvel Comics superhero series including two Captain America movies and two Avengers movies. The Avengers: End Game, the Russo brothers’ last entry in the series is considered one of the most expensive movies ever made for an estimated $356 million. However, the movie shattered box office records bringing in nearly $2.8 billion for Disney (DIS) which owns Marvel.
Co-director Anthony Russo told Deadline, “For those who were fans of Captain America: Winter Soldier, this is us moving into that territory in more of a real-world setting. That’s what this movie really means for us.”
Netflix intends to create its own franchise similar to James Bond or the Mission: Impossible series in a push to increase its subscriber base. Following the release of the company’s Q2 earnings on July 16, Co-CEO Reed Hastings stated that the company is “definitely focusing on creating franchises.”
Co-director Joe Russo commented on his hopes for the film, “The intention is for it to be competitive with any theatrical, and the ability to do with Gosling and Evans is a dream for us. The idea is to create a franchise and build out a whole universe, with Ryan at the center of it. We have all committed to the first movie, and that’s got to be great to get us to the second movie.” He added, “We think Netflix is the perfect place for this film.”
Netflix reported a 10.2 million increase in subscribers with company revenue growing 25% year-over-year despite missed revenue goals for the second quarter. In light of the pandemic, theaters have been shuttered which has forced many movie-goers to Netflix or its streaming competitors, Amazon (AMZN) Prime and Disney Plus. Netflix estimates that in the third quarter they will add 2.5 million more subscribers, which is down from last year’s same quarter of 6.8 million.
Following Netflix earnings announcement on July 17, more than a dozen analysts raised their price targets. Deutsche Bank analyst Bryan Kraft said, “Netflix continues to be an attractive long-term growth story within media as it maintains its leadership position as the preeminent premium global subscription video-on-demand service.” He added, “Netflix benefits from secular adoption of streaming and investment into the company’s expanding content portfolio.” He maintains a Buy rating on the stock and a price target of $525.00 implying an upside potential of 6%.
Also on July 17, Morgan Stanley analyst Benjamin Swinburne noted, “When the dust settles, we expect 35 million net adds and positive free cash flow for the year—reinforcing our confidence in long-term cash operating leverage in the business.” The analyst reiterated a Buy rating on Netflix and a price target of $600 (22% upside potential).
Overall, 22 analysts assign Buy ratings, 11 Hold ratings, and 4 Sell ratings, giving NFLX a Moderate Buy Street consensus. The average analyst price target stands at $518.32 suggesting 5% upside potential, with shares already up 52% year-to-date. (See Netflix’s stock analysis on TipRanks).
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