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The Ratings Game: Netflix stock bounces off 7-week low after CFRA swings to bullish from bearish

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Shares of Netflix Inc. surged off a seven-week low on Thursday, after CFRA analyst Kenneth Leon swung to bullish from bearish on the “best-in-class” streaming video giant, citing multiple positive catalysts ahead.

The stock
NFLX,
+4.93%

rallied 4.5% in afternoon trading, after falling 7.7% amid a four-day losing streak to close Wednesday at the lowest price since Nov. 10.

Although the stock has soared 74% since closing at a five-year low of $166.37 on May 11, it was still down 52.0% in 2022, as Netflix suffered subscriber losses for the first time in years after the pandemic-fueled surge ended. The stock was set to suffer its first yearly decline in eight years, and its worst yearly performance since it plunged 60.6% in 2011.

CFRA’s Leon pulled a U-turn on Netflix’s stock (NFLX), as he double upgraded it to buy from sell. He also raised his stock price target by 38%, to $310 from $225.

“Catalysts ahead for NFLX are new revenue streams from advertising, new ad-pay plans ($6.99/month) and new paid sharing efforts to better control sharing of subscription accounts,” Leon wrote in a note to clients. “Besides NFLX’s best-in-class platform for ease in search and personalization, we expect new original content like ‘Emily in Paris’, ‘Glass Onion’…and ‘Blood Origin’ to benefit subscription and reduce churn.”

Although a number of Netflix’s streaming video rivals have added live sporting events in an effort to boost subscriptions, Leon doesn’t believe Netflix needs a major sports event or sponsor, which carries risk of being a “big loss leader.”

Even without live sports, he believes it will be “difficult” for rivals to catch Netflix, which he says is one of the few profitable streaming providers with global scale.

Netflix’s stock has rallied 20.7% over the past three months, while the SPDR Communication Services Select Sector exchange-traded fund
XLC,
+2.78%

has slipped 1.0% and the S&P 500 index
SPX,
+1.81%

has gained 5.9%.

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