By Louis Juricic
Shares of Netflix (Nasdaq: NASDAQ:NFLX) extended gains Friday morning after reporting better than expected fourth quarter results after the bell on Thursday. Netflix's strong revenue and better than expected global streaming paid net additions stoked bullish sentiment, prompting several Wall Street firms, including Evercore ISI and JPMorgan, to increase their price targets on the stock.
JPMorgan maintained an Overweight rating on the stock and raised its price target from $330 to $390 and Evercore ISI, which also has an Outperform rating, raised its price target from $340 to $400. Both banks highlighted potential for accelerating revenue.
Content, advertising, and paid sharing should drive accelerating FXN revenue growth through 2023, said JPMorgan analysts in a note to clients. The analysts also think operating margins expand due to faster revenue growth and tighter cost discipline, and free cash flow ramps on improving profit and stable cash content spending.
Discussing news that Reed Hastings stepped down as a co-CEO to take on the role of executive chairman, the analysts said they expect a seamless transition to the combination of Ted Sarandos and Greg Peters as co-CEOs.
"Importantly, the changes today reflect how NFLX has been run for at least the last few quarters, & we expect Ted to continue to focus more on content & Greg more on operations, product, & technology. And while Reed will not be involved in day-to-day operations as Executive Chairman, we expect him to remain very close to the company in terms of strategy & important product decision," wrote the JPMorgan analysts.
Evercore ISI analysts see Netflix as a top internet stock. Discussing the quarter, they said, "Key drivers of the Subs upside: a robust content slate (Wednesday, Glass Onion, etc...), a return to more normal churn levels post the early ’22 price increase, and plausibly, the beginning of a solid contribution from password-sharing management in Latam and the rollout of [basic with ads]."