Why did Netflix stock rise today? More Street bullishness into earnings
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Netflix (NASDAQ:NFLX) rose 4.6% Thursday, part of a healthy rally in the Communication Services sector that also saw 3% gains from Alphabet, Meta Platforms and Disney -- but nonetheless adding to a rally in the big streamer's stock that has hit nearly 47% gains over the past six months.
That's come amid a stream of generally increasing positivity from Wall Street, which is getting ready for Netflix's first-quarter earnings due after the market closes next Tuesday. The upbeat commentary included BofA adding Netflix to its top 10 stocks for Q2, and J.P. Morgan urged buying the stock on pullbacks. (Bearish Benchmark is as usual the exception.)
Thursday brought more sunny views. Wedbush's Q1 survey supported the firm's confidence into the first-quarter print, and it said the company is in good position in a murky environment.
"We think Netflix made a great decision to launch an ad-tier, as growth had stalled in [U.S./Canada] and was heading toward full market saturation in EMEA," analysts Alicia Reese and Michael Pachter said. Even if ads aren't yet directly accretive, they should reduce churn and draw new subscribers, they said, which in turn should help boost free cash flow.
Netflix can also drive profitability higher as it starts addressing password sharing, they added. Wedbush maintains a $410 price target, well above Street average and implying 18% upside.
Wells Fargo also raised its estimates slightly, expecting consensus raises if management sounds optimistic about Netflix's implementation of paid sharing. Analyst Steven Cahall thinks even the delayed implementation will "feed incrementally bullish comments from [management] about the sub/revenue opportunity."
Cahall said the Street likely expects about $15 in earnings per share for next year, "and we see that moving to a $16-$21 range" depending on margin drop-through.
Meanwhile, reading across Apptopia data on monthly active users, Cahall says that points to better-than-expected first-quarter net adds of 2.5M subscribers. He has a $400 price target.
Seeking Alpha analysts at large rate the stock a Hold, while Wall Street on average sees it as a Buy. With valuation serving as a negative, Seeking Alpha's Quant Ratings also see Netflix as a Hold.