Netflix Stock (NFLX) Continues to Fall Post-Earnings. Morgan Stanley Says It’s Time to Buy

Netflix’s (NFLX) stock continues its post-earnings selloff, falling another 3% on April 20. Analysts at Wall Street investment bank Morgan Stanley (MS) see a buying opportunity for investors.

Morgan Stanley remains unapologetically bullish on the streaming company’s stock, reiterating a Buy-equivalent overweight rating on NFLX stock with a $115 price target. The price target from Morgan Stanley is 22% higher than where the stock currently trades.

The bank says that Netflix faces some near-term headwinds but the long-term bull case remains firmly intact. The main reason Morgan Stanley likes NFLX stock is the streaming giant’s pricing power, or the ability to raise prices without losing customers. Also, Netflix’s retention levels have improved and its revenue from advertisements continues to grow.

Netflix’s Weak Guidance

NFLX stock has fallen about 15% since its latest financial results were released on April 16. The main reason for the selloff was the company’s forward guidance, which failed to impress analysts and investors. It was also announced that Netflix co-founder and current board chair Reed Hastings is leaving the company, which has also hurt the share price.

Management reiterated their previous guidance for the current quarter, which sent the stock down in after hours trading. However, the company said that it expects operating margins to strengthen in the second half of this year. Still, analysts said they were hoping for a stronger outlook from Netflix, especially as the video streamer raised prices across the board in March.

Is NFLX Stock a Buy?

Netflix’s stock has a consensus Strong Buy rating among 37 Wall Street analysts. That rating is based on 29 Buy and eight Hold recommendations issued in the last three months. The average NFLX price target of $114.96 implies 22% upside from current levels.