By Senad Karaahmetovic
Evercore ISI analysts reiterated an Outperform rating on Netflix (NASDAQ:NFLX) stock and a $340 per share price target.
The analysts' price target implies an upside risk of around 10% relative to Netflix's closing price on Thursday. However, they note that shares could rally about 70% by 2024 if the streaming giant can add 25 million incremental subs.
They completed detailed, proprietary survey work in the U.S., France, and Germany.
"The key take from our general survey work is that we see rising penetration levels and improved churn rates for NFLX across all three markets. And the key take from our SAVOD survey is that, while very early days, we believe the company's BWA (Basic With Ads) offering is driving solid incremental subscriber growth, with roughly 50% of BWA subs being "new" to Netflix (either greenfield or churn-back) and with between 25% and 50% of current NFLX subscribers asserting that the BWA offering is reducing their likelihood to churn," the analysts said in a client note.
The analysis comes after Evercore ISI upgraded Netflix stock in September on the back of the company's ad-supported offering and password-sharing revenue opportunities.
"Our analysis continues to show that every 10MM incremental subs (whether through gross additions or reduced churn) generates over $1.00 in incremental EPS. So adding 25MM incremental subs by '25 (through acquiring Never-NFLXers, recovering ex-NFLXers, and/or reducing churn among current NFLXers) would equate to almost $20 in '25 EPS," the analysts further explained.
If Netflix can add $20 in 2025 EPS, they calculate that Netflix stock price could exceed $500 by 2024.
"NFLX remains our #1 Long recommendation for '23," the analysts concluded.
Netflix shares closed at $309.70 yesterday.