Netflix’s stock saw an impressive 16% surge following a promising quarterly earnings report. The streaming giant reported significant achievements, including a 70% increase in its new ad-supported subscription tier.
In terms of overall subscribers, Netflix added 8.76 million subscribers during the third quarter, surpassing Wall Street’s estimate of 5.49 million. This marks the most substantial increase in subscribers since the second quarter of 2020, a period when COVID-19 stay-at-home restrictions drove a surge in new sign-ups. This report signals a return to growth for Netflix, following its first net subscriber loss in over a decade recorded in April 2022, which had raised concerns about market saturation. The positive news was widely celebrated by analysts.
Morgan Stanley analysts upgraded the stock to “overweight” and raised its price target to $475, expressing confidence in Netflix’s ability to achieve its objectives, accelerate revenue growth to double digits, and expand margins.
Truist analyst Matthew Thornton, in a note on Thursday, highlighted the potential for ongoing growth in subscriber numbers due to efforts to curb password sharing. The firm also upgraded Netflix to a “buy” rating and increased its price target from $430 to $465. Thornton emphasized the positive impact of advertising growth in the long term, the addition of $10 billion in share buybacks, the popularity of key content like “Squid Game,” “Wednesday,” and “Stranger Things,” as well as the potential for video games as a free call option, along with other growth levers available to Netflix.