Netflix upgraded in sign of growing optimism on advertising | The Financial Express

Netflix upgraded in sign of growing optimism on advertising

JPMorgan sees investor sentiment “picking up” ahead of the launch of the ad tier, though it remains mixed

Netflix upgraded in sign of growing optimism on advertising
The firm lifted its rating to outperform from in-line while the price target was raised to $300 from $245.

Netflix Inc. shares rose on Thursday, after Evercore ISI upgraded its view on the video-streaming company, the latest sign that Wall Street is growing more optimistic about the potential of advertising on the service.

The ad-supported subscriber tier, along with moves on password sharing, together represent “catalysts that can drive a material re-acceleration in revenue growth,” wrote analyst Mark Mahaney. With the planned launch of the ad tier later this year, “there is a clear catalyst on the horizon, and valuation is intrinsically attractive.”

The firm lifted its rating to outperform from in-line while the price target was raised to $300 from $245.

The stock gained 5% in its biggest one-day percentage gain in more than a month. However, shares remain down more than 60% so far this year, making Netflix the second-worst performer among components of the Nasdaq 100 Index, which itself is down about 27%.

The Los Gatos, California-based company announced it would embrace advertising earlier this year, after it struggled to hold on to subscriber gains made during the pandemic. Investors have been warming to the idea, and earlier this week, the Wall Street Journal reported that Netflix projects the ad tier will reach about 40 million viewers by the third quarter of 2023. Bloomberg Intelligence called the estimate “a good start” that “implies plenty of room to grow.”

JPMorgan sees investor sentiment “picking up” ahead of the launch of the ad tier, though it remains mixed. “We continue to believe NFLX has urgency around both accelerating revenue growth & increasing FCF,” while recent hires should provide greater confidence in the company’s ability to monetize the tier, analyst Doug Anmuth wrote.

Separately, Vertical Group started coverage on Netflix with a positive rating this week, citing the potential of advertising. Marquis brands are purchasing “large swaths of inventory to be the first on Netflix’s ad-supported tier,” it wrote.

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