While streaming video rivals consider consolidation to compete, Netflix continues to lead the market and is poised for a solid fourth-quarter performance, a Wall Street analyst said Thursday. Netflix stock rose on the news.
Wedbush Securities analyst Alicia Reese reiterated her outperform rating on Netflix stock with a 12-month price target of 525. Further, Netflix is on the firm's "best ideas list."
Netflix stock climbed 0.5% to close at 491.61 on the stock market today.
"We think Netflix has reached the right formula with global content creation, balancing costs and increasing profitability, while its password-sharing crackdown and eventually its ad-supported tier should further boost cash generation," Reese said in a client note Thursday.
A consumer survey by Wedbush indicated an uptick in U.S. subscribers in the fourth quarter, she said.
Paramount Stock In Play
"Netflix is well-positioned in this murky environment as competitors have yet to settle on a coherent strategy," Reese said.
News reports are swirling that Paramount Global has put itself up for sale. Warner Bros. Discovery is one potential suitor.
Wall Street analysts have mixed views on a potential merger of Paramount and Warner, based on notes to clients.
JPMorgan analyst Philip Cusick says he thinks a Paramount-Warner deal would be poorly received by investors. The combined company would face a long regulatory review process. It would also have a high debt load and high exposure to the declining linear TV business, he said.
In addition to Paramount and Warner, potential merger players in the streaming video market likely include subscale players Comcast and Fox, Cusick said.
Wells Fargo analyst Steven Cahall said Warner would be better off as a seller than a buyer.
Netflix Stock Is Recent Breakout
On Dec. 18, Netflix stock broke out of a 22-week consolidation pattern at a buy point of 485, according to IBD MarketSmith charts.
The 5% buy zone extends to 509.25, based on IBD trading principles.
Netflix ranks first out of 20 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. Netflix stock has an IBD Composite Rating of 93 out of 99.
Further, Netflix stock is on IBD's SwingTrader list.
The next potential catalyst for Netflix stock is the company's fourth-quarter earnings report on Jan. 23.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
