Netflix (NASDAQ:NFLX) shares rose nearly 2% in morning trading on Wednesday as investment firm Goldman Sachs upgraded the streaming media giant's stock ahead of its second-quarter results later this month.
Analyst Eric Sheridan raised his rating on Netflix (NFLX) to neutral from sell, while also boosting the per-share price target to $400 from $230, noting the "overall positive current operating performance" for the company and the likelihood that the strong momentum continues into 2024 and 2025.
"In short, NFLX [management] has executed its password sharing initiative in excess of our prior assumptions, has regained content creation momentum in a manner that has muted any post-pandemic growth headwinds and overall industry competition has become more muted (especially from traditional media companies) in the past six months," Sheridan wrote in an investor note.
Since the firm added Netflix (NFLX) to its sell list on June 10, 2022, the stock has gained 135%, compared to a 12.5% rise for the S&P 500.
Looking to the second-quarter, Sheridan believes Netflix (NFLX) will report above estimates for subscriber additions, citing a mix of "solid content" and a more effective password crackdown than the company saw in Canada and Spain last quarter.
Going further out, Sheridan said that the company could generate between $22 and $27 per share in earnings in 2025, due to the aforementioned password crackdown, growth from its advertising tier, as well as normalized subscriber momentum and stable cash content spend.
Netflix (NFLX) is slated to report second-quarter results on July 19. A consensus of analysts expect the company to earn $2.85 per share on $8.27B in revenue.
Analysts are largely cautious on Netflix (NFLX). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates Netflix a HOLD.
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