Anne Marie Fox/NETFLIX
shares have badly lagged behind the market in 2021, but bulls see opportunity knocking.
The stock was down 4% year to date through the close of trading on Thursday as investors have worried over whether whether the streaming-video company can keep increasing its subscriber base after a pandemic-fueled surge in 2020. Netflix added 37 million subscribers, and the stock appreciated 60% last year.
Credit Suisse analyst Douglas Mitchelson is upbeat, regardless. On Friday, he raised his rating on Netflix (ticker: NFLX) to Outperform from Neutral. He maintained his target for the stock price of $586, about 13% above Thursday’s close at $518.06.
Subscriber growth will normalize starting in the 2021 fourth quarter, he predicted, saying a new, proprietary survey of U.S. consumers has reinforced his belief in the company’s strong competitive position and high user satisfaction.
A strong slate of content is on the way for the August to December period, including new seasons of both Stranger Things and Bridgerton, Mitchelson said. He noted that the company’s new offerings in the first five months of the year were lighter than normal, a period when the company also raised prices and saw a hangover from the huge subscription growth last year.
The outlook for the second and thirds quarters is uncertain, but any disappointment “would prove a clearing event” that would precede a rebound in growth in the fourth quarter, he said.
The recent survey, he said, shows consumers appreciate Netflix’s content and ad-free, easy to use product. Few respondents raised complaints about the service; just 8% raised questions about the value for the price. And consumers gave Netflix the highest satisfaction ratings of any streaming service.
“We also asked our panel where they turn first when looking for content to watch, and Netflix users actually turn to Netflix first more often than live TV – an important indication of how viewing habits have shifted,” Mitchelson wrote. “While this panel underscores Netflix’s enviable position in the U.S., we would expect similar results overseas given Netflix’s international content lead.”
The stock was up up 2.1%, to $528.72 on Friday morning.
Write to Eric J. Savitz at eric.savitz@barrons.com
