Netflix margin expansion to slow in 2025, says Barclays

Barclays keeps an Underweight rating on Netflix (NFLX) with a $550 price target following the Q3 report. Neither the quarter nor the guidance is likely to change estimates much but the lack of pricing upside may drive a bigger debate on the company’s revenue optimization trade-offs, the analyst tells investors in a research note. The firm says Netflix expects to drive most of the revenue growth next quarter from subscribers rather than price. Barclays believes the upside case in Netflix to justify the present valuation is predicated on revenue growth sustaining in at least the mid-teens. This will require either a substantial price increase or subscriber growth north of 20M again next year, and the revenue growth guidance seems to imply neither for next year, contends the firm. It thinks Netflix’s margin expansion pace will slow in 2025 and potentially beyond.