Despite a slow start to its advertising-supported service level, Netflix is likely to outperform its streaming video rivals in the year ahead, a Wall Street analyst says. Netflix stock popped higher Thursday after the analyst gave it a two-step upgrade.
CFRA Research analyst Kenneth Leon upgraded Netflix stock to buy from sell late Wednesday. He had downgraded Netflix to sell from hold on Aug. 18. Also, Leon raised his 12-month price target to 310 from 225.
On the stock market today, Netflix stock jumped 5.1% to close at 291.12.
"We think it will be difficult for competitors to catch Netflix, one of the few profitable streaming providers with global scale," Leon said in a note to clients.
Netflix has a "best-in-class platform for ease in search and personalization." It also is benefiting from buzzy original content such as "Wednesday," "Emily in Paris," "The Witcher: Blood Origin" and "Glass Onion: A Knives Out Mystery," he said.
Netflix Stock Is A Recent Breakout
"Catalysts ahead for Netflix are new revenue streams from advertising, new ad-pay plans ($6.99/month), and new paid sharing efforts to better control sharing of subscription accounts," Leon went on to say.
The internet television network launched its lower-cost Netflix Basic with Ads service on Nov. 3. But earlier this month, Digiday reported that the ad-supported tier had fallen short of viewership guarantees made to advertisers. Netflix stock plunged 8.6% on the news on Dec. 15.
Other analysts are cautious about Netflix's prospects in the year ahead.
Needham analyst Laura Martin reiterated her hold rating on Netflix stock in her note to clients last week. She said Netflix faces increased churn and lower average revenue per user in 2023. Those factors will pressure the company's subscriber and revenue growth outlook, Martin said.
On Oct. 19, Netflix stock broke out of a nine-week consolidation period at a buy point of 252.09, according to IBD MarketSmith charts. That breakout occurred after the company delivered an upbeat third-quarter report.
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