Analyst Optimism Sparks Pre-Market Surge
Netflix, Inc. NFLX experienced a moderate premarket surge on Wednesday following a price target upgrade by an esteemed analyst. Investors appear poised for the streaming giant’s first-quarter results scheduled for April 18.
Analyst Justin Patterson: KeyBanc Capital Markets analyst Justin Patterson, maintaining an Overweight rating, boosted the price target for Netflix by a significant 22%, from $580 to $705. This reevaluation hints at an enticing upside potential of roughly 14%.
Analyst’s Positive Outlook: Patterson’s heightened positivity stems from two key factors:
- Enhanced content quality
- Increased engagement driving monetization through price hikes and advertising revenue.
Based on data insights, Patterson declared robust viewership for Netflix. The current quarter showcases a promising content slate boasting popular series like “Avatar,” “Berlin,” “Fool Me Once,” “The Gentlemen,” “Griselda,” and “Love Is Blind.” The imminent release of “3 Body Problem” is anticipated to be another strong contributor for the first quarter.
Furthermore, the analyst highlighted healthy subscriber trends, with a solid 2% year-over-year growth in both January and February, continuing the astounding post-pandemic surge. Netflix app downloads surged by eight points in February, accompanied by a 12-point and six-point acceleration in Netflix searches in the U.S. and other regions, respectively.
Preliminary data for March also presents an encouraging outlook.
Patterson boldly stated that Netflix is on track to surpass subscriber expectations, with average revenue per user growth maintaining stability at December levels.
In response to the positive trajectory, Patterson revised his revenue estimates for 2024 and 2025, factoring in higher net adds estimates that outweigh a slight dip in ARPU. Additionally, he raised his 2024 and 2025 earnings per share estimates by 2% and 4%, respectively, propelled by robust revenue forecasts reflecting positively on the bottom line.
Venturing into the future, Patterson initiated revenue and EPS projections for 2026 at $48.9 billion and $28.18, respectively.
With a growing recurring revenue model, a blossoming ad revenue stream, and a consistent 20%+ EPS growth pattern, Patterson believes Netflix deserves a premium valuation compared to its industry counterparts.
Current Price Action: In premarket trade, Netflix stock exhibited a 0.52% upswing, hitting $623.94, according to data from Benzinga Pro.
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