After a tough year for shares, Netflix NFLX is getting a dose of Wall Street optimism.
Analysts at Wells Fargo upgraded the stock on Friday while the team at Cowen increased their price target, sending Netflix shares higher by more than 4.5% early in the trading session. Analysts at both firms cited Netflix's recently launched Ad-supported tier as a key catalyst for growth.
Cahall boosted his price target to $400 from $300 a share by converting the shares from Equal Weight to Overweight.
Cahall said the company will have more ways to win next year after a rough 2022 that included increased competition and slowing content growth. The series debuts of Wednesday, The Watcher, and The Dahmer Monster: The Jeffrey Dahmer Story, showcased that the content is clearly improving, according to Cahall. Following an especially encouraging limited theatrical release, Glass Onion: Knives Out will make its much anticipated debut on the platform on December 23. The analyst said that churn is improving in 2023 because of the platform's content push, in addition to the platform's ad-supported tier and password sharing crackdown.
The media giant's shares have climbed more than 65% over the past six months, despite the fact that they have fallen more than 45% since the start of the year.
We expect that NFLX's ad-supported tier will drive approximately 23 mm incremental subs by 2025 E to 279 mm global subs, compared to our prior expectation of 256 mm, Cahall wrote. Revenue growth of 7% in 2023 is the result of the streaming giant's engagement, according to the analyst.
We see NFLX as one of the leaders in global streaming and we expect market share to benefit the few scaled players over time, Cahall wrote.
Cowen analyst John Blackledge said Netflix will continue to be a leader in streaming, naming the stock the firm's top large cap pick for 2023. Blackledge reiterated his Outperform rating and increased his price target to $405 from $340.
Blackledge cited three main drivers for shares - free cash flow growth, re-accelerated revenue and new monetization levers as the company cracks down on account sharing and further leverages its cheaper, ad-supported tier.
Blackledge wrote in a new note to clients that NFLX is a pioneer in online streaming, with further expected growth in subs in the U.S. and expectations for long-term sub growth internationally in existing and new markets.
Alexandra is a senior entertainment and media reporter at Yahoo Finance. Follow her on Twitter alliecanal 8193 and email her at alexandra.canalyahoofinance.com.