
"We expect the streaming ad prices to solidify as advertisers gain experience with the medium, much as has happened with other digital offerings like Instagram Reels. Targeting and measurement should also improve, boosting demand. Still, we don't believe the advertising opportunity is large enough to allow Netflix to sustain its current growth rate as its most important markets, especially the United States, near maturity."
"We still view Netflix's share as substantially overvalued. For traditional media firms, streaming ad revenue won't replace declining traditional television revenue anytime soon, but we expect it will enable their streaming operations to continue improving margins. Alphabet shares have also surged on the release of proposed remedies in the Google Search antitrust case. The court's decision largely confirmed our view, and we haven't adjusted our fair value estimate, which sits below the stock's price for the first time in over a year."
Digital advertising demand has rebounded in traditional search and social, with Google Search and Meta posting accelerating third-quarter sales growth driven by high-single-digit pricing increases. The connected-TV market faces weak streaming ad prices amid surging inventory as viewers shift from traditional television to streaming and ad-supported offerings. Five major traditional media companies collectively reported only a 2% increase in streaming ad revenue year-over-year. Streaming ad pricing is expected to stabilize as advertisers gain experience and targeting and measurement improve, but streaming ad monetization is unlikely to sustain Netflix's current growth. Alphabet remains well-positioned in cloud and AI but appears richly valued.
Read at www.morningstar.com
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