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While Loop analysts previously had strong confidence in Netflix’s fundamentals, valuation concerns had kept them cautious. Hence, they made a move following a 15% correction from recent highs.
“Fundamentals continue to improve in NFLX’s favor. The competition is simultaneously raising prices and reducing content spend which should further boost NFLX’s competitive position. NFLX is the best positioned for the strike based on its larger pipeline of unreleased content and global production capabilities,” the analysts said in a client note.
Despite increased streaming competition, Netflix has maintained its share of streaming engagement, they added. Netflix’s market share is expected to grow as the streaming landscape consolidates.
“We believe the strike will accelerate the decline of the traditional TV business, benefiting streaming, and by definition, benefiting NFLX, the streaming leader. Implementing paid sharing has gone better than expected, and we believe over time NFLX advertising will become a major contributor,” the analysts added.
Netflix stock rose nearly 1% on the Loop rating upgrade. It is up nearly 40% year-to-date.
