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Netflix’s (NASDAQ:NFLX) rating was double upgraded to Buy from Sell, with its price target raised to a Street high of $375 from $200 by Pivotal Research on Wednesday. The latest upgrade is the eighth for the stock since September 7, 2022.
Pivotal Research analysts labeled Netflix a “relatively attractive tech play” and outlined several reasons for the upgrade.
They said the first reason was an “increase in our admittedly conservative 2023 net new subscriber forecasts from 5.5M to 15M (vs. consensus of 12.5M) driven primarily 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.”
They pinned the “substantial” increase in the firm’s price target on Netflix’s higher 2023 and beyond subscriber/ARPU forecasts and a “move to YE’23 target from YE’22 previously.” In addition, the analysts remarked that while they remain concerned about consumer churn down to $7 ad-supported packages — particularly in a recession — it is unlikely to develop into a potential issue until the second half of 2023 at the earliest.
“NFLX stock appears to be a relatively attractive place for investors to be amidst major slowdowns in digital advertising (NFLX should be able to lever pirate conversion and ad-supported to grow in virtually any environment),” added the analysts. “While competition is heating up NFLX still provides the most unique and powerful streaming experience globally with a reasonable path to accelerate subscriber growth over at least the next year.”
The analysts also stated that the firm still believes that Netflix CEO Reed Hastings will look to sell the company, to “most likely MSFT,” as early as 2024.
