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The Ratings Game: Why a former Netflix bear has become Wall Street’s biggest bull


Netflix Inc. shares have lost about half their value so far this year, and Pivotal Research Group analyst Jeff Wlodarczak sees better days ahead for the name.

He double upgraded Netflix’s stock

to buy from sell Wednesday, writing that the company could see new monetization initiatives pay off, plus it might even become a takeout candidate.

“We clearly carried our sell rating far too long and believe that the move higher in the shares post earnings is likely to continue,” he wrote. Netflix shares have rallied 25% since the company’s Oct. 18 earnings report, including a 3.6% bump in Wednesday’s session.

Netflix has recently offered more information about its plans to cut down on password sharing, and Wlodarczak thinks the company will have “success at converting a material number of effective pirates into paying subscribers” or getting them to trade up to more expensive plans that support account sharing.

While Wlodarczak also sees benefits in Netflix’s efforts to soon launch an ad-supported tier of service, he said that could impact results to a “lesser extent” relative to the password crackdown.

The specific opportunities ahead of Netflix could line it up well for the current climate, according to Wlodarczak, who sees the name as “a relatively attractive place for investors to be amidst major slowdowns in digital advertising.” That’s because Netflix “should be able to lever pirate conversion and ad supported to grow in virtually any environment.”

Wlodarczak increased his price target on the stock to $375 from $200, and the new target is now the highest listed on FactSet. His increased optimism on the share price dovetails with his recently raised expectations for 2023 subscriber counts and average revenue per user.

Apple Inc.

recently increased the price of its own streaming video service, part of a more general industry trend that Wlodarczak sees as “fundamentally positive.” There’s competition in the market, but he thinks Netflix has “the most unique and powerful streaming experience globally with a reasonable path to accelerate subscriber growth over at least the next year.”

Read more: Apple TV+ price increase is another sign company is ‘building the next HBO,’ says analyst

The company could also draw takeover interest, in his view, with Microsoft Corp. his most likely buyer. Such a deal may come as soon as 2024, he said, and garner regulatory approval in a new presidential administration.

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