Morgan Stanley Names Netflix Top Pick Over Disney Amid Tariff Challenges

Morgan Stanley has named Netflix as its new 'Top Pick' in the Media and Entertainment sector, replacing Walt Disney, citing the streaming giant's potential to thrive despite a challenging global economic environment. Analysts maintain an 'overweight' rating and a price target of $1,150, implying a nearly 33% upside from its recent trading price of around $854. The firm attributes its optimism to Netflix's strong subscriber engagement, with users averaging nearly two hours of daily viewing, which supports pricing power. While Netflix faces rising production costs and streaming taxes internationally, it historically offsets these by passing costs to consumers. Additionally, advertising revenue is projected to grow significantly, but it remains a small fraction of overall income. Overall, Morgan Stanley predicts Netflix will achieve robust revenue growth and expanding profit margins in the coming years.