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Shares of Netflix (NFLX 3.14%) jumped on Friday as two prominent analyst firms issued favorable reviews of the media-streaming veteran’s stock. As a result, Netflix was up by 5.6% at 12:30 p.m. ET. That’s the highest price the shares have seen since the earnings-based drop on April 20.
Wells Fargo analyst Steve Cahall upgraded Netflix stock from equalweight to overweight, suggesting that the bank’s clients now should expect Netflix to outperform the market over the next year or so. Cahall’s target price for this stock now stands at $400 per share, up from $300 per share and 29% above Thursday’s closing price.
Separately, Cowen analyst John Blackledge reiterated his outperform rating on the stock while lifting the price target from $340 to $405 per share. Blackledge puts Netflix among his “best ideas for 2023.”
The two firms concur that Netflix’s new ad-based subscription plan should drive subscriber sign-ups and revenue growth in 2023 and beyond. They also see room for long-term shareholder value creation after the dramatic price drop in the first half of 2022, even though Netflix already posted gains of more than 75% from the summer’s trough.
Wells Fargo noted that Netflix’s gains next year will anchor around revenue growth and stronger monetization of existing customers. Cowen also pointed to accelerating revenues and improved monetization. Both firms expected subscriber numbers to increase again, but neither saw that as a key metric to monitor.
These firms get it. This is precisely the right way to look at Netflix nowadays. Subscriber counts are old hat. Instead, revenue growth is Netflix management’s favorite business metric in 2023. They manage the company to maximize that result above all others. Investors should pay attention to that crucial strategy shift.
Analyst reports are not a gospel of absolute truth, but they often move the market as investors take a new analysis to heart. In this case, both Wells Fargo and Cowen are making sense. I have posted similar advice all year long, adding to my Netflix position during the summer’s severe price drop. It’s good to see financial pros reaching the same conclusion at long last.
Wells Fargo is the new kid on the block here, as Cowen already had an outperform rating and simply added a deeper explanation of their bullish view today. Either way, the two analyst firms recommend buying Netflix stock on the cheap today, and I agree wholeheartedly.
Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Anders Bylund has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
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