- Even under a turbulent macro scenario, Netflix has performed well, considering its focus on generating free cash flow.
- The implementation of a lower-cost service through an ad-supported tier could bring an important increase in subscribers over the next year.
Figure 1:Why Should You Buy Netflix Stock According To Wall Street?
It Is Highly Unlikely to Have A Prolonged Period Of Subscribers Losses
Netflix reported that it had "only" 970,000 subscribers, contrary to market estimates of 2,000,000. According to Stifel Nicolaus analyst Scott Devitt, the company's growing subscriber base was showing signs of stabilization.
Devitt sees a long period of subscriber loss becoming less and less likely. Therefore, he has a bullish recommendation on Netflix. Hes assigned their shares a price target of $250, implying an upside of about 10%.
Citi analyst Jason Bazinet believes Netflix's Q2 outlook was better than Wall Street expected. He has strengthened his bullish position on the stock and has a price target of $275.
Appropriately Responding to Macro Headwinds
Netflix has successfully managed macro headwinds, according to Michael Pachter of Wedbush. The company has reduced costs in order to accommodate slower revenue growth, and has become more focused on generating free cash flow.
Pachter believes that Netflix's positioning is prudent, as long as the company continues to grow rapidly.
The analyst expects Netflix's free cash flow to be $1 billion in full year growth thereafter, which may act as a bullish catalyst for Netflix stocks. As such, Pachter currently has a buy recommendation and an NFLX price target of $280 per share.
Pachter wrote a comment on his Twitter feed not long ago, saying that he was chastised when he saw Netflix as overvalued at $690. Today, he sees NFLX as undervalued, with stocks falling about 70% from their all-time highs.
A Tier that is monetized might increase the number of members.
Netflix's intention to offer a lower-cost alternative to an ad-supported plan, Cowen analyst John Blackedge sees a potential of four million new members by 2023 generating about $17 per person per month.
Thomas Champion, a Piper Sandler analyst, thinks Netflix will generate roughly $1.4 billion in additional revenue per quarter when it implements its ad-supported tier. Champion maintains a neutral rating on NFLX.
(Disclaimers: this is not investment advice. The author may be long one or more of the stocks mentioned in this article. Also, the article may contain affiliate links. These partnerships do not affect editorial content.