In response to Netflix’s third-quarter growth and statements from company leaders about its forthcoming advertising tier, a number of Wall Street analysts raised their price forecasts for the company’s stock. “The dark days are over,” “the worst appears behind it” and “the sky, at least temporarily, is not completely falling on the key subscriber flywheel” were among the cacophony of takes to arrive in investor notes after the Oct. 18 disclosure.
Netflix Stock Gets 2 Upgrades
The streamer’s stock, which is run by co-CEOs Reed Hastings and Ted Sarandos, soared more than 10 percent in early trade, reaching $265.18 a few minutes into the session. After two consecutive quarters of membership losses, Netflix’s news that it had added 2.4 million customers for a total of 223 million worldwide subs was welcome.
Mark Mahaney, an analyst at Evercore ISI, restated his “outperform” rating and raised his price target for the stock by $40 to $340. According to Mahaney, “what’s important about the stock is that Netflix fundamentals have stabilized, and now comes the largest catalyst across consumer internet (Netflix’s ad-supported option launching in November). Among Amazon and Meta, Netflix is one of our three largest holdings.”
Michael Morris, an analyst at Guggenheim, shared this upbeat tone when he kept Netflix on his “buy” list and increased his price target for the stock by $40, to $305. “We expect the new product opportunity, compelling incremental metrics (‘higher engagement than any other streamer – with room for growth,’) and streaming profit leadership will be key elements to sustained positive investor reaction and multiple expansion,” Morris wrote. According to the analyst, “consistent with our expectation of sustainably above peer group profit and free cash flow growth,” the price objective represents a 35 percent premium to the NASDAQ stock market index.
Mark Mahaney, an analyst at Evercore ISI, reiterated his “outperform” rating and raised his price target for the stock by $40 to $340. “What’s key in terms of the stock is that Netflix fundamentals have stabilized, and now comes the biggest catalyst across consumer internet – the launch of Netflix’s ad-supported offering in November,” Mahaney argued. “Netflix is one of our top three longs, along with Amazon and Meta.”
John Blackledge, an analyst at Cowen, maintained his “outperform” rating and increased his price target by $15, to $340. He attributed the increase to “adjusted” financial assumptions. Strong third-quarter content, such as Dahmer – Monster: The Jeffrey Dahmer Story, helped “Netflix register a 2.41 million sub increase, better than the guide of 1.0 million.” Netflix’s forecast for paid net additions in the fourth quarter of 4.5 million was below expectations but above the market consensus of 4.08 million. For additional revenue and subscribers in ’23, Netflix is launching an ad-supported tier on November 3 and expanding its password-sharing solution in the first quarter of ’23.
Netflix Q3 revenues were up 5.9% over the prior year, the slowest growth rate in company history. Its stock was down 61% in the last year heading into earnings and is currently up 14% in after hours trading. $NFLX pic.twitter.com/kPtPPf5f5B
— Charlie Bilello (@charliebilello) October 18, 2022
Analyst Steven Cahall from Wells Fargo agreed, saying, “The dark days are over.” But he stuck to his “equal weight” rating on the streamer with a $300 price target. “If there’s a unifying narrative for Netflix in the third quarter 2022, it’s that the worst appears behind it,” he argued. “Netflix was un-ownable when net adds turned negative, and while there will always be ebbs and flows in the slate, it’s now tough to see sub loss in future years even if churn remains elevated versus history (and management did note higher churn still).”
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