(Bloomberg) — Netflix Inc. bulls have been boosting their price targets ahead of the streaming giant’s results, betting that top shows like Bridgerton will keep subscriber growth robust.
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The average price target among analysts tracked by Bloomberg has been creeping higher, helped by raises from Morgan Stanley, Bank of America, Guggenheim and others. Jefferies analyst James Heaney, who increased his target to $780 from $655 this week, said Netflix is well placed to beat on subscriber numbers because of content like Bridgerton and NFL games, as well as its success in converting viewers who were sharing passwords.
Hanna Howard, portfolio manager at Gabelli Funds, is also optimistic. “Netflix is still really in a league of its own, especially on the strength of its international content and depth of consumption,” she said. While expectations are high, there’s still an opportunity for Netflix to outperform, she added.
Shares of Netflix slid as much as 1.3% in intraday trading Thursday.
On average, Wall Street analysts are forecasting second-quarter subscriber additions of about 4.9 million. That would follow estimate-trouncing additions of more than 9 million users in the first quarter. Netflix warned at the time that subscriber growth will likely be lower this quarter due to typical seasonality and said it plans to stop reporting the metric in 2025.
Some see that consensus as easily beatable. Morgan Stanley’s Benjamin Swinburne expects additions to come in at 7 million for the quarter and more than 30 million this year. “Strong core execution, paid sharing and ad tiers that help penetrate more price sensitive cohorts are contributing to a potential record net adds year,” he wrote, referring to the firm’s new, cheaper, advertising-supported service. Swinburne raised his price target to $780 and has a bull case on the stock of $950.
Another solid quarter could finally allow Netflix shares to hit their first all-time high since 2021 and fully rebound from a rout in 2022. The stock is currently about 7% below its closing record, with options data signaling an implied one-day move — in either direction — of nearly 9%.
“For a trader this is a wait-and-see event,” said Jay Woods, chief global strategist at Freedom Capital Markets. “If it gaps up and holds, then it’s probably going to continue to trend higher over the next three months.”
Still, not all bulls believe Netflix can deliver against high expectations.
“The bar is high, and while we’re long-term NFLX bulls, we’d be cautious going into this print,” Evercore ISI analysts led by Mark Mahaney wrote, noting that the second quarter is typically slower. He added that while Bridgerton was a standout, the rest of Netflix’s content slate in the quarter was “uneventful.”
Mahaney, who has an outperform rating on the shares, also said that Netflix’s valuation is elevated at about 32 times forward earnings.
Bullish investors will also need to refocus their investment cases after Netflix stops reporting subscriber numbers in a couple of quarters. That metric has been key for most of the company’s existence, but the streaming giant now has a greater emphasis on making more money from existing subscribers, and wants analysts to focus primarily on revenue and profit.
That change did not go down well when it was announced in April, but the company’s overall trajectory over the past two years has been one of a big comeback. Netflix suffered the worst six-month stretch in its history during the first half of 2022 — losing customers, which forced it to lay off hundreds of employees and cut back on programming. The company responded with its password-sharing crackdown and is also trying to push into selling ads and making video games.
Read: Netflix Co-CEO’s Password-Sharing Crackdown Fueled Comeback
“Netflix is in a unique spot here, as is the setup” going into earnings, said Matt Stucky, chief portfolio manager at Northwestern Mutual Wealth Management. Part of the company’s narrative has been its recovery since 2022, he said.
“This reacceleration of the fundamentals has been a really good story and the stocks follow through on that.”
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Earnings Due Thursday
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–With assistance from Subrat Patnaik.
(Updates stock moves midday.)
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