The US stock market has struggled to find any notable momentum throughout the year so far. Yet, there is no more important time for that to turn around than during the earnings season. Moreover, with Netflix (NFLX) sharing its Q1 earnings, is the stock overvalued to experts?
The media giant has firmly become one of the most interesting stocks to watch this year. Although much of Wall Street is struggling from ongoing tariff concerns, the streaming platform doesn’t share the same worry. However, has that impacted whether or not its shares are at a fair value relative to investors?
Also Read: Netflix (NFLX) Outperforms Stock Market, Jumps 7%: Here’s Why
Netflix Shares Q1 Earnings as Experts Update Their Outlook on the Stock
The US stock market stood firm Tuesday after a slight step back to start the week. That came after the company had a firm rebound last week, after a month of declines. Altogether, the development reinforced the notion that volatility and inconsistency have been the prevailing themes for the market this year.
With some stocks struggling from macroeconomic pressure and import duty increases, the media sector is in a unique position. Subsequently, Netflix (NFLX) has emerged as the leader of the pack, with experts exploring if the stock is undervalued amid its most recent Q1 earnings report.
Also Read: Netflix (NFLX) Stock: Three Reasons Why You Should Invest
In its most recent post-earnings outlook update, Morningstar noted that Netflix stock was overvalued. Specifically, they have given the company a $720 per share long-term fair value estimate. Moreover, that has been increased compared to its previous $700 target, which would imply a 28 times multiple on its 2025 earnings per share forecast.
The firm projects a 10% average annual revenue growth over the next five years. Additionally, they expect margin expansion “as international markets mature and benefit from greater scale.”
The report does expect Netflix to remain strong in a market that others will struggle in. “We think Netflix will hold up well in a recession and won’t be significantly impacted by tariffs,” experts noted. However, they project “any material economic slowdown to put even further pressure on growth, making it difficult to justify the inflated multiples at which the stock trades.”
