After a tough year for stocks, Netflix (NFLX) is getting a fresh dose of optimism on Wall Street.
On Friday, analysts at Wells Fargo upgraded the stock, while Cowen’s team raised its price target, sending Netflix stock more than 4.5% higher at the start of the trading session. Analysts at both companies cited Netflix’s recently launched ad-supported tier as a key catalyst for growth.
“After a period of turmoil around declining subscribers and revenue growth, NFLX is capitalizing on every arrow in its quiver,” wrote Wells Fargo analyst Steve Cahall in a new note to clients.
Cahall upgraded shares from Equal Weight to Overweight and increased his price target to $400 per share from $300.
Cahall added that the company will have “a lot more opportunities to win” next year after a tough 2022 that included increased competition and slowing content growth. “The content improves significantly,” Cahall noted after the successful series debuts of Wednesday, Dahmer: The Jeffrey Dahmer Story, and The Watcher.
Glass Onion: Knives Out will make its highly anticipated debut on the platform on December 23, after a particularly encouraging limited theatrical release. The analyst said he sees churn improving in 2023 amid this content push, on top of the platform’s ad-supported layer and crackdown on password sharing.
The media giant’s shares, which have fallen more than 45% year-to-date, are up more than 65% over the past six months.
“Overall, we predict that the ad-supported tier of NFLX will increase by +23mm additional subs to 279mm global subs by 2025E, up from our previous expectation of 256mm,” wrote Cahall. “We don’t see AVOD being anything other than incremental for subscribers.”
The analyst estimated revenue growth at 7% in 2023, adding that the streaming giant’s commitment “suggests it has a lot of pricing power ahead” to boost subscription fees.
The story goes on
“We see NFLX as one of the co-leaders in global streaming and expect market share to benefit the few scaled players over time,” Cahall wrote.
Netflix is releasing Glass Onion: A Knives Out Mystery in select theaters for one week over Thanksgiving weekend (Courtesy Netflix)
Cowen analyst John Blackledge agreed that Netflix will continue to lead in streaming, calling the stock the company’s top large-cap pick for 2023. Blackledge reiterated its outperform rating and raised its price target to $340 $405.
Blackledge cited three key drivers for stocks — free cash flow growth, renewed revenue acceleration, and new monetization levers as the company moves away from account sharing and continues to leverage its cheaper, ad-supported tier.
“We see NFLX as a pioneer in online streaming with continued anticipated growth in US subscribers and expectations for long-term subscriber growth internationally in existing and new markets,” Blackledge wrote in a new note to customers.
Blackledge’s additional potential from the company’s new ad tier is “probably still underestimated” on Wall Street, emphasizing: “We consider NFLX to be the best ‘recession game’, especially as the ad tier is attractive to budget-conscious consumers.”
Alexandra is a senior entertainment and media reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]
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