Netflix (NFLX) stock has pulled back 13% over the past five trading sessions as the company’s guidance failed to impress investors. Moreover, the news that Reed Hastings, the streaming giant’s co-founder and current chairman, would exit the board when his term expires in June overshadowed the company’s Q1 results. Nevertheless, NFLX bulls see the pullback as a buying opportunity. Notably, Wolfe Research analyst Peter Supino reiterated a Buy rating on Netflix stock with a price target of $107, citing his confidence in the company’s “ability to raise prices over the coming years,” as long as it continues to see strong engagement.
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Wolfe Analyst Highlights Netflix’s Solid Engagement
Supino stated that investors often raise concerns about the streaming giant’s loss of user attention to Alphabet’s (GOOGL) YouTube, Meta Platforms (META), and TikTok. However, the 4-star analyst highlighted that data indicate that Netflix’s core engagement trends are positive.
Furthermore, Supino added that Netflix sells a “highly differentiated product whose value is indirectly tied to raw engagement.” Interestingly, Wolfe’s Netflix engagement tracker reflects the growing popularity of originals and local content. Despite fears about stagnation and AI disruption, Wolfe continues to see favorable underlying trends.
The analyst contends that the company’s international engagement trends are stronger than they appear, though average engagement is being affected by its rapid expansion into markets (like Japan) with lower screen time. Supino added that Netflix continues to benefit from the global decline of linear pay-TV and the rise of connected TVs (CTVs). He believes that if CTV households continue to grow by 70 million to 100 million annually and Netflix maintains its CTV household penetration at about 30%, it will be well-positioned for sustained mid-single-digit subscriber growth.
Supino expects Netflix to capture a larger share of TV viewing time as viewers shift from linear TV to streaming. However, growth is expected to be gradual, with the analyst estimating that the average U.S. Netflix subscriber already spends 1/3 of daily video time (1.6 hours per day) on the platform. That said, Supino believes that Netflix will still be able to raise prices in the years ahead if it remains a key part of its subscribers’ daily viewing habits.
Is NFLX Stock a Buy, Sell, or Hold?
Currently, Wall Street has a Strong Buy consensus rating on Netflix stock based on 29 Buys and eight Holds. The average NFLX stock price target of $114.96 indicates 24.2% upside potential.
