Netflix stock surges 16% after Wall Street buys into ad-driven subscriber growth

A lady begins Netflix on a TV inside her house.

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Netflix shares surged 16% Thursday following a promising quarterly earnings report.

The streaming large reported a number of victories, together with a 70% bounce in its new ad-supported subscription tier.

As for general subscribers, Netflix added 8.76 million subscribers for the third quarter, considerably larger than the 5.49 million Wall Street estimated. It’s the most important bounce in subscribers because the second quarter of 2020, when Covid-19 stay-at-home restrictions drove new sign-ups.

Wednesday’s report prolonged a return to progress for Netflix — after the corporate in April 2022 recorded its first internet subscriber loss in over a decade, creating fears that the market had been saturated — and a number of other analysts celebrated the constructive information.

Analysts at Morgan Stanley upgraded the inventory to chubby and raised its worth goal to $475.

“We believe Netflix will deliver the objectives it set out a year ago, accelerate revenue growth back to double digits and expand margins,” Morgan Stanley mentioned in a Thursday analyst be aware.

Truist analyst Matthew Thornton mentioned in a Thursday be aware that the password-sharing crackdown may proceed to propel subscriber progress into the subsequent 12 months. The agency additionally upgraded Netflix to a purchase score and raised its worth goal from $430 to $465.

“We upgrade to Buy with our thesis predicated on ongoing password sharing benefits (into 2024), advertising ramp (long-term), and share buybacks ($10b added), with top 3 tent-poles by 2025 (Squid Game, Wednesday, Stranger Things), with video games a free call option, and with optional growth levers available to NFLX,” Thornton mentioned within the be aware.

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Netflix inventory chart after third-quarter earnings.

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