Netflix is going to become a significant advertising player in the coming years, according to JPMorgan. On Friday, the firm reiterated its overweight rating on the name, calling it a top pick with its ability to see revenue growth in the mid-teens this year and next, expand margins and generate free cash-flow growth. Its price target of $750 implies 9% upside from Thursday’s close. Analyst Doug Anmuth cites an anticipated boost in scale and monetization in 2025, believing that the number of ad-tier subscribers will reach 31 million by year-end and 42 million by the end of next year. He estimates that the company’s advertising revenue, excluding subscriptions, will reach at least 10% of total revenue in 2027. “While the Ad Tier is currently a drag on total company [average revenue per member], we expect focus on ad formats, NFLX’s in-house ad tech platform, & programmatic and measurement partnerships to drive higher monetization,” the analyst said in a Friday note. “There are challenges as NFLX is building its Ad Tier from scratch, there are only a handful of strong, scaled digital ad platforms, & advertising is not in NFLX’s DNA, but we expect monetization to build through strong multi-year execution,” he said. Looking ahead, JPMorgan expects the company to reach critical scale across each ad market next year. To date, Netflix has about 278 million global subscribers, and its ad tier has generated more than 45% of all signups in ad markets. With the streaming giant expressing an “attractiveness” of the $6.99 ad tier specifically, the firm also anticipates that the majority of U.S subscribers who had been on the basic plan — which JPMorgan notes had been about 15 million — to shift down to this tier. These changes in plans and pricing particularly, as well as bundling and live event content, are what can increase scale, Anmuth said. Netflix launched its ad-supported plan in November 2022 to increase revenue and subscriber count after losing subscribers for the first time in more than 10 years . The company also began cracking down on password sharing months later as part of its efforts. This year, shares of Netflix have soared, rallying more than 41%. NFLX YTD mountain Netflix, year-to-date
