After labeling Netflix stock a sell for years, a longtime bear on the streaming video company on Wednesday upgraded NFLX stock to neutral from underperform.
In a note to clients titled "Hell Freezes Over," Wedbush Securities analyst Michael Pachter said Netflix stock was worthy of an upgrade after it hit his price target of 342 on Tuesday.
On the stock market today, Netflix rose 5% to 358.79 amid a broad market rally.
From its all-time high of 700.99 on Nov. 17 to Tuesday's close at 341.76, Netflix stock had collapsed 51%. Also, it has an IBD Relative Strength Rating of 16 out of 99. IBD's RS Rating tracks market leadership by using a score from 1 to a best-possible 99 that identifies how a stock's price action over the last 52 weeks matches up against all other stocks.
Netflix Faces Slowing Growth
"The recent share-price decline reflects that Netflix investors have begun to appreciate that the company's long-term prognosis is as a low growth, extremely profitable enterprise," Pachter said.
He added, "While we do not anticipate significant share-price appreciation in the near term, Netflix's first-mover advantage and large subscriber base provides the company with a nearly insurmountable competitive advantage over its streaming peers."
Netflix appears to have hit a ceiling on subscribers in the U.S. and Canada, he said. The company's subscriber growth now is coming from less-developed regions at much lower subscription prices, Pachter said.
Also, Netflix is facing intense competitive pressure from rival streaming services such as Disney+ from Walt Disney, Pachter said.
Netflix ended 2021 with 221.8 million subscribers worldwide. Also, the U.S. and Canada accounted for 34% of its total subscriber base.
Netflix Stock May Have Hit A Floor
Elsewhere on Wall Street, Wells Fargo analyst Steven Cahall reiterated his overweight, or buy, rating on Netflix stock. He also gave it a price target of 600.
In a note to clients Monday, Cahall said he believes that Netflix stock has hit a floor after its disappointing first-quarter guidance.
The IBD Stock Checkup ranks Netflix stock as fourth out of 23 stocks in IBD's Leisure-Movies & Related industry group. That group ranks a lowly No. 178 out of 197 industry groups that IBD tracks.
Further, Netflix stock has an IBD Composite Rating of 51 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
