Netflix rally continues as Pivotal boosts to Buy, sets Street-high target
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Despite a Nasdaq index weighed down by stock tumbles at Alphabet and Microsoft, Netflix (NASDAQ:NFLX) is riding high again today - up 4.4%, and crossing the $300 per share threshold for the first time since a post-earnings tumble in April. (See Netflix's year-to-date performance vs. the market here.)
The stock is up more than 31% over the past month, powered mainly by an Oct. 18 easy earnings beat; it had also closed above its 200-day moving average on Friday for the first time since January.
Netflix (NFLX) is the subject of a double upgrade at Pivotal Research, which has raised its rating to Buy from a previous Sell and set a Street-high price target of $375 - with analyst Jeffrey Wlodarczak saying "we clearly carried our Sell rating far too long and believe that the move higher in the shares post-earnings is likely to continue."
He cites a wide variety of factors, including boosting the firm's "admittedly conservative" expectations for 2023 net subscriber adds to 15M from 5.5%M (and now above consensus of 12.5M).
That's powered by "what we believe will be success at converting a material number of effective pirates into paying subscribers or higher ARPU and to a lesser extent the short term subscriber benefits of launching an ad-supported service," Wlodarczak said.
He also argues that Netflix looks like a relatively attractive place for investors to park funds during a major slowdown in digital advertising, saying the company should be able to grow its currently modest ad-supported tier in any environment.
On the flip side, he is concerned about consumer churn down to the cheaper ad plan in a recession, but that's unlikely to become an issue until the second of half of 2023 at the earliest.
Of interest on the M&A rumor front, Wlodarczak adds "We continue to believe that (co-CEO Reed) Hastings will look to sell NFLX (to most likely MSFT) as early as â24 (with regulatory approval in â25 under a potential new administration)."
Pivotal's $375 target now implies 24% upside.
Netflix (NFLX) was displaced as the top streaming-usage shareholder in Nielsen's estimation by YouTube, but it's still dominating time streamed with its latest runaway hit, Monster: The Jeffrey Dahmer Story.