Netflix shares have surged after analysts at Bank of America realigned the video streaming giant’s stock as a “buy” and raised its price target to $370.
BofA analyst Jessica Relf Erlich cited Netflix’s launch of an ad-supported streaming tier, a crackdown on password sharing and a return to “steady” subscriber growth as reasons for recommending the stock. “We believe this pivot offers several benefits, such as making better use of existing first-party scale and data (benefits advertisers covet), potentially monetizing the engagement of password-sharing viewers, and expanding the TAM (total addressable market) from subscribers (particularly international),” Relf Erlich wrote in a Nov. 15 investor note.
Netflix shares rose $11.85, or 4 percent, to $311.12 in morning trading on Tuesday. That’s less than a 52-week high of $700 for the streamer. But a new-looking Netflix that has stabilized subscriber growth as it pushes into ad-supported streaming has seen a series of price target increases from other bullish analysts after its third-quarter gains.
That includes Evercore ISI’s Mark Mahaney and Cowen analyst John Blackledge raising their price targets to $340, and Wedbush Securities analyst Michael Pachter Guggenheim analyst raising his price target to $325. Meanwhile, Wells Fargo’s Steven Cahall is well ahead of his price target of $300.
BofA’s Relf Erlich claimed that Netflix remains a streaming “juggernaut”, with global scale and strong branding. That’s despite the global streaming market looking increasingly saturated, prompting Netflix to report its first quarterly loss of subscribers earlier this year as growth in North America stalled.
Netflix returned customer growth in the third quarter of fiscal 2022 as it added 2.4 million subscribers for a total of 223 million global customers. “Despite slower sub-growth, we believe efforts to improve monetization through a value-focused ad tier and significant password share conversion have the potential to increase operating/financial advantage,” Relf Erlich wrote in the investor note.
She estimated that adding an AVOD tier could bring in $719 million in new North American revenue for Netflix by 2024, and reducing password sharing could bring in another $863 million in new revenue on the US and US markets. Canadian markets.