Seaport upgrades Netflix to buy ahead of earnings report

Seaport Research Partners joined the bull camp on Netflix ahead of the company’s earnings report next week.

Analyst David Joyce upgraded shares of the streaming giant to buy from neutral. Joyce’s $955 price target implies 12.6% upside over where the stock finished Wednesday’s session.

“NFLX should remain a core holding due to top-line growth, [operating income] margin expansion, and [free cash flow] conversion,” Joyce wrote in a Wednesday note to clients.

Netflix is set to post earnings Tuesday after the bell. Joyce noted shares have retreated leading up to the report, with shares down nearly 5% in the new trading year.

Part of Joyce’s optimism stems from his increase in expected net member additions. Seaport now estimates Netflix gained 9 million subscribers on balance, up from a previous forecast of 5.7 million.

Netflix also has operational tailwinds tied to strong content that can justify the stock’s “premium” valuation, Joyce said. For example, he pointed to the new season of the TV show “Squid Game.” On top of that, he noted the company’s work in streaming special events and recent showing at the Golden Globes as further reason to see this valuation as earned.

“We … acknowledge that the market had tested the elevated multiple willing to be applied to this top-line and margin-expanding business model,” Joyce said.

Netflix’s success with events like the Jake Paul-Mike Tyson fight and Christmas Day NFL games can also bolster the streamer in media rights conversations going forward, the analyst said.

With the upgrade, Joyce joined the majority on Wall Street analysts with buy-equivalent ratings, per LSEG. Netflix shares about 1.5% in Thursday’s premarket trading.