Netflix Stock To Rally 14%? Analyst Bumps Up Price Target On 2 Promising Trends: 'Tracking Toward Subscriber Beat'

Netflix, Inc. (NASDAQ:NFLX) shares rose moderately in premarket trading on Wednesday after an analyst raised the price target for the stock. The streaming giant is set to release its first-quarter results on April 18.

The Netflix Analyst: KeyBanc Capital Markets analyst Justin Patterson maintained an Overweight rating and raised the price target for the stock by about 22% from $580 to $705. The updated price target suggests a scope for roughly 14% upside potential.

The Netflix Thesis: Patterson listed two reasons for his increased optimism on Netflix and these include:

• Improving content quality
• Improving engagement, driving monetization ramp in both price increases and ad revenue.

Citing data, the analyst said Netflix viewership was strong. Quarter-to-date content slate appears solid with six series, including “Avatar,” “Berlin,” “Fool Me Once,” “The Gentlemen,” “Griselda,” and “Love Is Blind,” the analyst said. “We are cautiously optimistic that this Thursday’s release of “3 Body Problem will be another strong 1Q contributor,” he added.

The KeyBanc analyst also noted that subscriber trends appear healthy, with 2% year-over-year growth in January and February, marking a continuation of record post-pandemic growth. Netflix app downloads accelerated by eight points in February and searches for Netflix in the U.S. and other countries accelerated by 12 points and six points, respectively, he said.

Initial March data also appears encouraging, he added.

“Taken together, we believe Netflix is tracking toward a subscriber beat,” Patterson said. Average revenue per user growth remained stable with December levels, he said.

See Also: How To Buy Netflix (NFLX) Stock

As such, the analyst raised his 2024 and 2025 revenue estimates, giving effect to his higher net adds estimates more than offsetting lower ARPU. He also upped his 2024 and 2025 earnings per share estimates by 2% and 4%, respectively, driven by stronger revenue estimates flowing through to the bottom line.

Patterson initiated his 2026 revenue and EPS estimates at $48.9 billion and $28.18, respectively.

“Given more recurring revenue, an emerging ad revenue stream, and consistent 20%+ EPS growth, we believe NFLX should trade at a premium to peers,” he said.

Price Action: In premarket trading, Netflix stock rose 0.52% to $623.94, according to Benzinga Pro data.

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