Netflix stock is forecast to rise 20%. What does this have to do with corporate culture?

Analyst Needham raised its target price on the securities of streaming giant Netflix and now expects them to grow by another 20%. The investment bank believes that Netflix's stock performance is closely linked to employee efficiency: the company spends more on staff than on content, and Netflix's revenue and free cash flow per employee are significantly higher than those of other large IT companies. Still, some on Wall Street believe that Netflix's securities, up 40% since the beginning of the year, have already been fairly valued and now the company needs time to meet investor expectations. Netflix will release its second quarter report on July 17.

Needham analyst Laura Martin raised her target price on Netflix stock from $1126 to $1500 apiece and reiterated a Buy advice, reports CNBC. Martin's new target suggests Netflix's market value will rise another 20%. According to the analyst, the driver of Netflix's stock price growth will be good labor productivity metrics. "We believe that the quality of employees and corporate culture directly affect the financial results of the company. The key quantitative indicators here are absolute profitability, its dynamics and revenue per employee - they show whether the staff really creates real value for the company," Martin said in a note.

The analyst emphasized that Netflix's personnel costs already exceed $17 billion a year, which is more than the company's budget for content production. According to her, this makes labor productivity metrics an important indicator for stock performance. She added that in fiscal 2024, Netflix had the highest revenue per employee among large companies at $2.78 billion, nearly double the average of the nine large-cap companies she tracks. At the same time, Netflix was "noticeably more productive" than Apple, Meta and Alphabet, the analyst said.

Netflix's free cash flow per employee has grown by more than half a million dollars over four years, from negative in 2021 to plus $506k in 2024, the Needham analyst added. "We expect this trend to continue as revenue growth at Netflix continues to outpace headcount growth, fueled by price increases in the subscription model and rising advertising revenue," the analyst concluded.

In trading on July 11, Netflix shares slipped by more than 1% to $1236 apiece. This became their lowest in almost three weeks. On June 30, Netflix quotes set an all-time high of $1341.15 apiece. Investors see them as a "safe haven" at a time of economic instability amid Donald Trump's trade war, notes Barron's. Since the start of 2025, the company's market value has risen 40%. By comparison, the main U.S. stock index, the S&P 500, has added about 6.5% over the same period.

On Friday, two more investment banks - Piper Sandler and JPMorgan - raised their target prices on the company's securities. Piper Sandler analyst Thomas Champion raised the target from $1150 to $1400 - up 12% from the last closing price - while maintaining a "buy" (Overweight) advice. JPMorgan raised the target just $10 to $1230, suggesting a 1.5% drop in the company's quote from the July 10 close. An investment bank analyst reiterated a neutral rating for Netflix securities.

Earlier this week, Seaport Research analyst David Joyce dropped his advice to buy Netflix's shares: he downgraded them from Buy to Hold and removed his $1230 target price. He said the current share price already incorporates expectations for future growth, which itself could take several years. "We believe the company needs time to realize investor expectations before there is new upside potential for the stock," Joyce said in a note cited by Barron's.

About 65% of analysts who have assigned ratings to Netflix's securities advise investors to buy them (Buy and Overweight ratings). The remaining third are neutral with a Hold rating and only 2% suggest selling. The Wall Street consensus target price is $1240 - down nearly 1% from the July 10 close.

In the first quarter of 2025, Netflix reported record profits, which also exceeded analysts' expectations. The company achieved such results thanks to the new tariff with advertising: it accounted for 55% of new subscriptions in those countries where it is available. In addition, Netflix also confirmed the revenue forecast for 2025 and assured that the company is able to withstand a possible economic downturn despite the tense situation with duties. According to sources of The Wall Street Journal, inside Netflix are also discussing an ambitious goal to double revenue by 2030 and reach a capitalization of $1 trillion (now about $531 billion), but the company stressed that these are goals, not forecasts. The next major benchmark for investors will be Netflixsecond-quarter earnings, which Netflixwill report on July 17.

This article was AI-translated and verified by a human editor