Netflix shares have risen sharply after Bank of America analysts reinstated the video streaming giant’s stock as a “buy” and raised its price target to $370.
BofA analyst Jessica Relf Erlich cited Netflix’s launch of an ad-supported streaming tier, a crackdown on password sharing and a return to “steady” subscriber growth as grounds to recommend the stock. “We believe this pivot provides several benefits such as better utilizing its existing scale and 1st party data (advantages advertisers covet), potentially monetizing engagement of password sharing viewers, and expanding the long term TAM (total addressable market) of subscribers (particularly internationally),” Relf Erlich wrote in a Nov. 15 investors note.
Netflix shares surged $11.85, or 4 percent, to $311.12 in mid-morning trading on Tuesday. That’s down on a 52-week high of $700 for the streamer. But a new-look Netflix that has stabilized subscriber growth as it pushes into ad-supported streaming has garnered a series of price target rises from other bullish analysts after its Q3 earnings.
That includes Evercore ISI’s Mark Mahaney and Cowen analyst John Blackledge raising their stock price targets to $340, Wedbush Securities analyst Michael Pachter Guggenheim analyst boosting his share price target to $325. Meanwhile, Wells Fargo’s Steven Cahall is standing pat at his $300 price target.
Making her bull case as her price target exceeds that of Wall Street peers, BofA’s Relf Erlich argued Netflix remains a streaming “juggernaut,” with global scale and strong branding. That’s despite the global streaming market looking increasingly saturated, which prompted Netflix to report its first quarterly subscriber losses earlier this year as growth stalled in North America.
Netflix returned customer growth in the third quarter of fiscal 2022 as it added 2.4 million subscribers for a total of 223 million global customers. “Despite slower sub growth, we believe efforts to improve monetization via a value-oriented ad tier and significant conversion of password sharers has the potential to drive operating/financial upside,” Relf Erlich wrote in the investors note.
She estimated adding an AVOD tier could drive $719 million in new North American revenues for Netflix in 2024, and reducing password sharing could drive another $863 million in new revenue in the U.S. and Canadian markets.