Netflix Shares Soar 14% on Strong Q3 Report as Markets Open
Netflix’s strong third quarter report had the stock leaping 14% early Thursday, as the expectations-topping results generated a slew of analyst upgrades and price target increases.
Netflix reported net income of $1.67 billion, or $3.73 per share on a 7.8% gain in revenue to $8.54 billion after the market closed Wednesday. The results handily topped analysts’ expectations earnings of $3.46 per share on revenue of $8.53 billion, according to Zacks Investment Research.
The dominant streamer added 8.76 million subscribers during the quarter. reaching 247.15 million globally, in part thanks to crackdown on password sharing. Operating income jumped 25% from last year, to $1.9 billion.
Wall Street cheered the results, sending the stock up $49.14, to $395.33. The stock is up about 34% since the start of the year.
Wells Fargo analyst Steven Cahall, who kept a “Buy” rating an $460 price target on the stock, implying expectations that the shares will rise about 33% within the next 52 weeks. Cahall said in a note to clients that both the firm and investors had taken recent investment commentary to mean a less compelling financial growth algorithm for Netflix, according to TheFly.com. The results showed that the negativity was overdone, Cahall, wrote.
Truist analyst Matthew Thornton upgraded Netflix to “Buy” from “Hold” and raised his price target of $465, up from $430, according to TheFly.
Thornton pointed in a research note to the company’s better-than-expected margin outlook, predicated on the ongoing password sharing benefits, along with increases in advertising and share buybacks as positives. He pointed to “Netflix’s “Squid Game,” “Wednesday,” and “Stranger Things” along with the company’s forway into video games as catalysts going forward.
Morgan Stanley also upgraded Netflix, to “Overweight” or Buy, from “Equal Weight” and hiked its price target to $475, up from $430, TheFly said.
JPMorgan analyst Doug Anmuth also raised his price target, to $480 from $455, and kept an “Overweight” rating on the shares. In a note, the firm wrote that despite Netflix’s “seemingly cautious” intra-quarter margin comments that resulted in a lot of share volatility, the results “were strong across most dimensions,” according to TheFly. The company’s paid sharing is “clearly working,” as evidenced by the 8.8 million net subscription adds during the quarter, the analyst wrote.
Wedbush says Netflix remains on the firm’s “Best Ideas List,” given the firm’s view that the company can generate significantly more free cash flow than its guidance suggests. The analysts wrote that Netflix has reached the right formula with its global content to balance costs and generate increasing profitability, while the password sharing crackdown and, eventually, its ad-supported tier should further boost cash generation.
The firm wrote that Netflix is well-positioned in this murky environment as streamers are shifting strategy, and should be valued as an immensely profitable, slow-growth company. Wedbush has an “Outperform” rating on the shares with a price target of $525.
Goldman Sachs analysts wrote that they came away from the earnings call and shareholder letter with the perception that Netflix’s confidence for the medium and long term is rising. Goldman raised its price target to $400 from $390 and kept a “Neutral” rating on the shares, according to TheFly.
Deutsche Bank kept a “Buy” rating but lowered its price target to $460 from $485, according to TheFly. The analyst wrote that one key point to come out of the callw as that management finally addressed the question of how long they expect to realize a benefit to subscriber growth from paid sharing enforcement; the answer being “several more quarters.”
The post Netflix Shares Soar 14% on Strong Q3 Report as Markets Open appeared first on TheWrap.
