Invest in Netflix Now as It's Poised to Rally Another 20%, According to Needham

Netflix could be poised for further stock gains in the months ahead, driven by notable improvements in labor productivity, according to Needham & Co.

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The firm reiterated its “buy” rating on Netflix and raised its price target for the streaming company’s shares from $1,126 to $1,500, suggesting a nearly 20% upside from Thursday’s closing price. The new target reflects growing confidence in the company’s ability to generate strong financial returns through operational efficiency.

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In a note released Friday, Needham analyst Laura Martin explained the rationale behind the upgraded price outlook. She emphasized that employee quality and corporate culture are directly tied to financial performance. “We believe absolute returns, trends in returns, and per-employee return comparisons are essential quantitative tools to assess whether a company employs high-performing, value-generating staff,” Martin wrote.

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Martin pointed out that Netflix's labor costs exceed even its massive annual $17 billion content budget. That observation, she argued, underscores the importance of labor productivity trends as a key indicator of future share price movement.

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According to her research, Netflix led all major technology companies in terms of revenue per full-time equivalent (FTE) employee in fiscal year 2024, generating $2.78 billion per FTE. This figure placed Netflix well ahead of rivals such as Apple, Alphabet, and Meta Platforms in productivity terms. In fact, the streaming giant reported nearly double the average revenue per FTE compared to the nine large-cap firms under Martin’s coverage.

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She also highlighted a major improvement in Netflix’s free cash flow per FTE. Between 2021 and 2024, that metric transitioned from negative to positive, growing by $506,095 per employee during the period. This jump reflects Netflix’s success in scaling revenue at a faster rate than it expands its workforce.

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Martin believes this positive trajectory is likely to continue, driven by both subscription price hikes in Netflix’s traditional ad-free tier and rising revenue from its ad-supported subscription model. She expects Netflix to maintain strong top-line growth without significantly increasing headcount, thereby enhancing labor efficiency further.

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Netflix’s stock has already been on a tear in recent months. The shares have surged over 49% in the last six months and are up more than 40% since the start of 2025. By comparison, the S&P 500 has gained just under 8% over the past six months and nearly 7% so far this year, indicating Netflix has substantially outperformed the broader market.

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Wall Street analysts overall have a favorable outlook on the stock. According to data from LSEG, 34 of the 49 analysts covering Netflix currently rate it either “strong buy” or “buy.” Only 15 analysts maintain a “hold” rating, and none have issued a “sell” recommendation, reflecting widespread confidence in the company’s fundamentals.

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The productivity metrics cited by Martin paint a compelling picture of Netflix’s operational discipline. Despite the high costs associated with creating original content, Netflix appears to be squeezing more value out of each employee than most of its peers. This efficiency, according to Needham, is translating directly into financial gains that support a higher stock valuation.

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Netflix’s strategic focus has also shifted in recent years. Once singularly focused on subscriber growth, the company is now emphasizing profitability and cash flow. Initiatives such as cracking down on password sharing, tiered pricing structures, and expanding its ad-supported offering have helped diversify revenue streams and improve financial health.

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In her note, Martin also highlighted how Netflix’s business model now benefits from economies of scale. As the company reaches new audiences and tightens its control over production costs, it can sustain profit growth without proportionate increases in labor or operational spending. This dynamic supports continued gains in both revenue per employee and free cash flow generation.

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These trends come at a time when investors are increasingly focused on efficiency and margin expansion rather than just top-line growth. With Netflix outperforming both in terms of stock price and internal metrics, analysts like Martin see plenty of room for further appreciation.

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In premarket trading Friday, Netflix shares were slightly higher, continuing the stock’s upward momentum.

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With robust analyst support, leading productivity metrics, and multiple growth levers—especially in advertising and pricing power—Netflix appears well-positioned to deliver strong shareholder returns throughout the rest of 2025 and beyond.

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