Netflix Stock (NFLX) Down 6.5% on 1 Month: Analyst Upgrades Rating Ahead of Earnings

Netflix's stock (NFLX) has pulled back over the past month, dropping 6.5% on the period to sit 13% lower than the 52 week high, set back at the end of July. Some bullish impetus this morning will be welcome for holders, with an upgrade from Seaport Research signalling potential upside ahead of the company's third-quarter earnings report.

The upgrade from Neutral to Buy by Seaport Research, with an increased price target of $1,385 from $1,230, is based on the firm's belief that Netflix is poised for further monetization through its advertising infrastructure.

Seaport Research also cited Netflix's continued gains in market share against traditional linear television, alongside its curated content strategy, as drivers of engagement leadership. The firm suggests that the recent moderation in the stock's momentum is merely a digestion period following a substantial year-to-date gain of over 30%.

This positive outlook aligns with Netflix's recent strong financial performance. In the fourth quarter of 2024, the company added 18.9 million subscribers, significantly exceeding Wall Street expectations. This subscriber growth was propelled by live sporting events and the return of popular series like “Squid Game.”

The company reported earnings per share of $4.27 and revenue of $10.2 billion, representing a 16% year-over-year increase. Subsequently, Netflix implemented price increases for most service plans in the U.S., Canada, Portugal, and Argentina, further bolstering market confidence. The stock price surged approximately 13% following these results, adding nearly $50 billion to its market capitalization.

Currently, the consensus among Wall Street analysts is a “Moderate Buy” rating for Netflix. Out of 36 analysts, 23 have assigned a Buy rating, 9 a Hold rating, 3 a Sell rating, and 1 a Strong Buy rating. The average twelve-month price target is $1,328.87, indicating a potential upside of approximately 8.19% from the current trading price.

The upcoming third-quarter earnings report, scheduled for October 21st, will be a crucial indicator of Netflix's ability to sustain its growth trajectory. The company has provided earnings per share guidance of $6.94 and revenue guidance of $11.52 billion for the quarter. Markets will be closely monitoring these results, assessing subscriber growth, advertising revenue, and overall profitability.

Seaport Research's upgrade, coupled with the company's solid financial footing and anticipated earnings report, has created a positive backdrop for Netflix. With much priced in, there will be plenty of watchers when October 21st comes around for clues as to what comes next for the firm.