BMO Capital analyst Brian Pitz maintained Netflix Inc
Netflix has 70 million advertising-based video-on-demand (AVOD) monthly active users (MAUs) (versus 40 million in May).
Pitz estimates Netflix will have 90 million AVOD monthly active users by the end of 2025.
AVOD monetization is gaining traction among Brand advertisers, with SMBs to come given revamped programmatic capabilities.
Given this backdrop, Pitz estimated 4.5 ads per hour, rising to 5 in 2026E, which could prove conservative.
WWE on Netflix began on Jan. 6 and should result in significant engagement improvement compared to Peacock (Pitz estimates 2-3 times engagement improvement).
Pricing remains an optionality for both Standard and Premium tiers in 2025.
Pitz raised her end-2025E AVOD users to 90 million (versus 70 million MAU in the fourth quarter of 2024E) from 60 million following successful live events in the fourth quarter of 2024E and the beginning of WWE in the first quarter of 2025E with upside potential from Women's World Cup Soccer in 2027 and unannounced content.
With ~180 billion hours viewed (2 hours per user per day), Pitz estimated Netflix would exit 2025E with just 4.5 ads per hour per member.
Pitz channel checks indicate that AVOD monetization is gaining traction.
Content initiatives are producing massive viewership. For example, Squid Games 2 debuted with 68 million views in one week, while Tyson/Paul generated 108 million live viewers and an estimated 125 million (live+1). The inaugural Raw episode attracted a 116% increase in U.S. viewers versus 2024E audience levels.
Pitz expects the Women's World Cup to be a hit, which ensures attractive ROAS across multiple verticals. Netflix Standard and YouTube Premium
CTV pricing levers should continue for several years.
Pitz's 2025E revenue is mainly unchanged at 12% growth (guidance is 11-13%). The analyst modeled 2026E revenue of $48.7 billion and ~30% operating income margins.
Price Action: NFLX stock is up 2.15% at $846.22 at last check Wednesday.
