Netflix, Inc. (NASDAQ:NFLX) experienced a remarkable week, driven by an earnings report that exceeded expectations, propelling the stock to its most impressive performance in over a year. The streaming giant’s shares surged as much as 3.1% in New York trading on Friday, contributing to a weekly gain of 20%, marking its strongest week since October 2022. This surge has elevated Netflix’s stock to its highest level in over two years.
The positive momentum builds on a favorable start to the year for Netflix, rebounding from a volatile 2023, during which dual strikes in Hollywood pressured its shares. After the strikes, the company reported robust earnings in consecutive quarters, instilling optimism among investors. Netflix now stands as the top performer on the S&P 500 Index for the week.
Robert Conzo, CEO of The Wealth Alliance, remarked on the extraordinary recent growth, stating, “Netflix seems to continue to outperform, and keep investors coming to the table.”
In the last quarter of 2023, a substantial increase in subscribers reaffirmed the success of Netflix’s recent initiatives, including price hikes, a password crackdown, and an advertising-subsidized tier. The company also made a significant move into live events by acquiring exclusive rights to Raw and other programming from World Wrestling Entertainment.
David Klink, senior equity analyst at Huntington Private Bank, acknowledged that Netflix’s efforts to boost subscriptions surpassed analysts’ expectations, stating, “Netflix was right, we were wrong.” Meanwhile, competitors such as Warner Bros. Discovery, Inc. and Paramount Global have struggled, with Netflix outpacing them in stock gains.
Analysts have responded to Netflix’s strong performance by raising price targets and upgrading ratings. Macquarie analyst Timothy Nollen highlighted the success of Netflix’s strategic moves and increased the price target to $595 from $410.
Despite Wall Street’s bullish stance on Netflix, there’s caution regarding the upside potential for shares. While 65% of analysts give it a buy rating, the average price target is approximately $570, representing around 1% upside from the current trading level. Netflix’s premium valuation, trading at 32 times forward earnings, prompts some investors to carefully assess its future trajectory compared to industry peers and the broader market.
Nonetheless, Conzo emphasized that investors have demonstrated a willingness to pay a premium for companies exhibiting growth, as seen with the Magnificent Seven technology stocks trading at about 28 times forward earnings. “Investors continue to shrug it off and keep moving on,” he concluded.
Featured Image: Unsplash
Author Faith Yakubu 
