Netflix Analysts Are Raising Price Targets After Q4 Beat, Even The Ones With Sell And Neutral Ratings: Here's Why

Zinger Key Points
  • Netflix reports 230.75 million paid subscribers at the end of the fourth quarter, adding 7.7 million.
  • Analysts weigh in on the results and what could be ahead for the streaming giant.

Streaming giant Netflix Inc NFLX reported fourth-quarter financial results that saw revenue come in ahead of analysts’ estimates.

The company also reported 230.75 million paid subscribers at the end of the fourth quarter, adding 7.7 million. The subscriber additions in the quarter beat the company’s expectations of 4.5 million.

Analysts are weighing in on how strong the quarter was for Netflix, which has some bearish analysts raising their price targets.

The Netflix Analysts: Bank of America Securities analyst Jessica Reif Ehrlich had a Buy rating and raised the price target from $370 to $410.

Morgan Stanley analyst Benjamin Swinburne had an Equal Weight rating and raised the price target from $300 to $350.

Benchmark analyst Matthew Harrigan had a Sell rating and raised the price target from $225 to $250.

Oppenheimer analyst Jason Helfstein had an Outperform rating and raised the price target from $400 to $415.

Rosenblatt Securities analyst Barton Crockett had a Neutral rating and raised the price target from $226 to $343.

Needham analyst Laura Martin had a Hold rating and no price target.

Related Link: Trading Strategies For Netflix Stock Before And After Q4 Earnings

The Analyst Takeaways: Bank of America's Ehrlich called the fourth quarter a strong beat for Netflix on the subscriber front and said 2023 free cash flow guidance was “superb.”


“The company also provided extremely strong 2023 financial guidance,” Ehrlich said.

The analyst saw the rollout of the ad-supported streaming plan as a growth driver in fiscal 2023 and beyond.

“We are bullish on the long-term potential of advertising which management stated could eventually reach 10% of total revenues.”

Morgan Stanley's Swinburne saw strength in margins and free cash flow coming for the company.

“A strong content quarter drove net additions above expectations while lower cash content spend expectations for ’23 lift our FCF outlook and price target,” Swinburne said.

The analyst said the focus on the ad-supported streaming plan and paid sharing plans could mean less need to raise prices for consumers going forward.

Benchmark's Harrigan had a Sell rating on Netflix but raised the price target after the fourth quarter earnings results.

“Netflix appears subject to the same difficult streaming market conditions as its media peers, even as its operating margins benefit from its business maturity relative to newer entrants,” Harrigan said.

The analyst noted the success of “Wednesday” could have contributed to the strong subscriber figure in the fourth quarter.

The price target was raised based on a discounted cash flow valuation through 2027 and the analyst noted the same method ran through 2033 bringing the fair value up to $285.

Oppenheimer's Helfstein raised the price target on Netflix shares based on subscriber additions, a strong content slate, lower churn and the small contribution from the ad-supported plan rollout.

“While churn is back to ‘normal’ levels, management expected elevated churn in 1Q with the expansion of paid sharing initiative, before moderating in 2Q,” Helfstein said.

The analyst highlighted improved profitability guidance for fiscal 2023 from the company.

Rosenblatt Securities' Crockett questioned the strong subs coming from an impressive content slate compared to quarters that included “Squid Game” success and had subscriber figures miss estimates.

A catalyst for the analyst was the clamp down on password sharing, which could impact 100 million people and increase the company’s revenue.

“If freeloaders all transitioned to pay, Netflix would be able to do very well versus its guide for double-digit constant currency revenue growth for the year,” Crockett said.

The analyst saw around 25% transitioning to a paid subscription and around 50% paying for an add-on plan.

Crockett had a Neutral rating but raised the price target based on a long-term focus.

“Having doubled from their 52-week low, and trading close to the price where we launched coverage in April of last year, we retain a Neutral rating and up our price target to $343 from $226.”

While many of the analysts raised the price targets, Needham's Martin did not have a price target and said it might be too early to buy Netflix shares at current levels.

“We worry that Netflix will have elevated churn over the next 2 quarters owing to a price increase implemented in the most disruptive way possible,” Martin said.

The analyst saw 2023 estimates and valuations too high for Netflix with comments that advertising revenue won’t be meaningful in the next fiscal year.

“From a valuation point of view, we worry that Netflix’s multiple is too high as its growth principally relies on price increases.”

NFLX Price Action: Netflix shares are up 6.94% to $337.71 on Friday versus a 52-week trading range of $162.71 to $458.48.

Read Next: Netflix Co-CEO Hastings Praises Rivals Ad-Based Model: 'They've Got A 10 Year Head Start'

Photo: Unsplash

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