Morgan Stanley hiked its rating on Netflix following the streaming giant’s stellar earnings report, seeing the shares potentially rising 20% on strong revenue growth. The Wall Street firm’s analyst Benjamin Swinburne upgraded Netflix to overweight from equal weight Thursday, while raising his 12-month price target to $475. The new forecast represents 20.6% upside from Thursday’s trading level around $394. “We believe Netflix will deliver the objectives it set out a year ago, accelerate revenue growth back to double digits and expand margins,” Swinburne wrote in a note to clients. “At the same time, some of the froth in the stock and expectations have come out, creating a better entry point.” Shares of Netflix surged more than 13% Thursday as the company’s quarterly profit, and new subscriber additions, beat expectations. Netflix’s subscriber growth was driven by a password-sharing crackdown efforts and interest in its new ad-supported tier. It also raised prices for its basic and premium plans in the U.S. NFLX YTD mountain Netflix Morgan Stanley praised Netflix’s “strong operational execution and improving return on content spend.” Meanwhile, the bank said Netflix has a clear framework for investors to consider how it balances investing while driving profit margins. “Against this rising anxiety and falling stock price, the business has been accelerating, the password crackdown is working, and the competition has pulled back,” Swinburne said. “With 3Q results, Netflix has provided clear guidance for its content spending and margin expectations for ’24, removing some added uncertainty.” The analyst’s bull case for Netflix in the most optimistic scenario calls for a $550 price target, or 40% upside. For the bear case, the analyst sees Netflix shares falling as low as $300, or 25% downside. — With additional reporting by CNBC’s Michael Bloom
