Netflix Inc (NASDAQ:NFLX) received positive reviews from analysts after its fourth-quarter results sent the shares surging 13% higher to a two-year high of $560 in the first hour of trading in New York.
However, Deutsche Bank's reaction was to downgrade the shares, removing its 'buy' rating and moving to 'hold', but raising its share price target to $525 from $460 as it upped earnings and cash flow estimates.
"Netflix is still the best story in media," analyst Bryan Kraft said, adding that there's little debate that the streamer has "cemented a strong position in the market globally and is the undisputed leader in streaming entertainment".
In addition to leading the sector in subscribers, engagement and revenue, Netflix also continues to "push the envelope" with product strategies such as paid sharing, advertising, and video games, Kraft added, noting that the decision to downgrade was "a difficult one".
Alicia Reese at Wedbush was not for turning, with the stock remaining on the broker's 'best ideas' list, given a view that the company can generate "significantly" more free cash flow than management's current guidance suggests.
The analyst said she thinks Netflix has "reached the right formula" with global content creation, balancing costs, and increasing profitability, while its password-sharing crackdown and ad-supported tier "should further boost cash generation".
"Netflix is well-positioned in this murky environment as competitors have yet to settle on a coherent strategy; accordingly, we believe Netflix should be valued as an immensely profitable, slow-growth company."
Wedbush raised its price target to $615, seeing further catalysts including the advertising potential of the WWE deal in 2025 and beyond, expansion of its gaming into more licensed IP, and growth in viewership on the ad tier.
Bank of America was another of those impressed, raising its price target to $650 from $585.
While Netflix was a founder member of the formerly famous FAANG grouping, it is not one of the so-called Magnificent Seven that have been key to driving US stock markets in the past year.
These fourth-quarter numbers and guidance for 2024 could perhaps allow it to "press its case for membership of this club, perhaps even at Tesla’s expense, especially if the latter’s share price keeps sliding", said AJ Bell investment director Russ Mould.
He noted that Tesla’s shares are down by more than a third from their peak of summer 2023 and by half from 2021’s high, while Netflix’s shares are back in the ascendant, despite still technically being in a bear market, as they sit just more than a fifth below their 2021 zenith.