Netflix, Spotify upped to buy at Citigroup as stocks don't reflect growth, economics
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Netflix (NASDAQ:NFLX) and Spotify (NYSE:SPOT) were upgraded to buy at Citi, as the investment firm notes subscriber-based stocks have come under "significant" pressure, but the stocks are not reflecting any growth.
Analyst Jason Bazinet raised his rating on the two tech stocks, noting that the enterprise value per subscriber analysis "suggests prevailing equity values don't assume material sub growth or improving subscriber economics beyond 2023."
Netflix (NFLX) shares were up more than 3% in pre-market trading to $396.06, while Spotify tacked on nearly 2% to $176.36.
Though Bazinet raised his rating on the stocks, he lowered the price target on Netflix to $450, down from $595.
"While Netflix and Spotify may see more modest sub growth, we see other top-line vectors," Bazinet added, suggesting that the firm "has ample pricing power." 
Regarding Spotify (SPOT), Bazinet believes the Daniel Ek-led company can boost revenue via "ad-supported monetization." 
The upgrade came after Netflix reported fourth-quarter results that sent shares tumbling. In the wake of the sharp drop in the stock price, hedge fund manager Bill Ackman revealed that his firm had purchased 3.1 million shares, making it a top-20 shareholder in the company.
Last week, Netflix's (NFLX) co-Chief Executive, Reed Hastings, purchased $20 million worth of stock in an apparent vote of confidence after the share price tumbled following fourth-quarter results.