Buy Netflix stock now for these reasons, the analyst says

Buy Netflix stock now for these reasons, the analyst says

Shares of Netflix Inc. gathered on Monday to find the sell-off in the broader stock market, after a new Oppenheimer analyst covering the streaming video giant explained why it’s time for investors to jump in again.

NFLX Stock,
climbed 2.3% in premarket trade, and ES00 futures,
for the S&P 500 SPX index,
fell 0.9%. It was the sole component of the Communications Services SPDR Select Sector exchange-traded fund XLC,
which was gaining ground ahead of the opening.

Analyst Jason Helfstein took Netflix’s coverage, and raised the rating to outperform. He set a $325 price target on the stock, representing about 35% upside to Friday’s closing price of $240.13.

Not only will the launch of a lower ad-price subscription plan attract some first-time subscribers, Helfstein believes there is a greater opportunity to re-engage those who previously dropped out of the service.

“The launch of ad series should accelerate subscriber growth, and drive ARPU [average revenue per user] and a slow joke,” Helfstein wrote in a note to clients.

He also believes that Netflix will command a high cost per thousand (CPM) from advertisers, given that it has the highest viewership in the industry, and as streaming continues to take share from television.

Also read: Traditional TV ‘is marching to a certain precipice,’ says former Disney CEO Iger.

“[Netflix] it attracts significant audiences for marquee show releases, comparable to awards shows and major sporting events, suggesting the company can sell ads at significantly higher CPMs than conventional television media,” Helfstein wrote . “Also, he could choose to release shows in conjunction with major advertisers’ product launches.”

He believes Netflix’s move to crack down on some passwords, its partnership with Microsoft Corp. MSFT,
on the ad-supported subscription plan and the move into the gaming arena could be more upside for results and the stock.

With Helfstein’s upgrade, 14 of the 45 analysts surveyed by FactSet are bullish on Netflix, while 6 are bearish and 25 are neutral. At the end of 2021, 34 of 47 analysts were bullish, 4 were bearish and 9 were neutral. The average stock price target has fallen to $244.91 from $681.79 over the same period.

Set of Facts

Meanwhile, Netflix stock has been on a downward spiral in recent months, as better-than-expected second-quarter results reported in July helped fuel a rebound. That followed a disappointing first-quarter report in April, in which the company said it had lost subscribers for the first time since its inception.

Read more: Netflix’s bull case has been ‘severely tested’ but now is the time to buy, Evercore says.

After falling 72.4% year to date to a five-year closing high of $166.37 on May 11, the stock has rallied 44.3% through Friday. By comparison, the communications services ETF has fallen 8.8% since May 11 and the S&P 500 has lost 1.6%.

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