With a near-record slice of U.S. television consumption and a slate of high-profile content in the pipeline, Netflix is a buy, Loop Capital says.
The firm upgraded Netflix to Buy from Hold and lifted its price target on the stock to $1,350 from $1,150 in a research note Wednesday. The company "has won the streaming wars," Loop's Alan Gould wrote.
Netflix shares rose 2.1% to $1,226.25 on Wednesday. The stock, a Barron's pick in May, has climbed 38% this year and 78% over the last 12 months.
Even as the streaming environment grows more crowded, Netflix has seen strong user engagement, which Loop calculates as hours viewed of top 10 weekly shows and movies in both English and non-English. The firm estimates engagement has so far increased 17% in the third quarter from the year prior, driven by shows like "Squid Games" and "KPop Demon Hunters."
The strong quarter of content has helped Netflix trend toward a new record for its estimated share of U.S. television consumption, at more than 8.5%. Longer-term threats from well-heeled competitors, Loop said, may be overblown.
"We believe the Street is overly concerned with competition from a well-financed, and aggressively spending, Skydance," Gould wrote. Paramount Skydance won the streaming rights for the Ultimate Fighting Championship in August, Loop noted, but that doesn't mean Netflix will consistently be outspent for top titles.
"NFLX spends $17-18B on entertainment content, more than any other company and has the most developed network for global content creation," Gould said.
Netflix will keep the content coming in the fourth quarter. A final season of "Stranger Things" is on the way, along with the next "Knives Out" film, another season of "The Diplomat," and two NFL games on Christmas.
Wall Street has remained mostly optimistic on Netflix stock amid its extended bull run. Of the 54 analysts polled by FactSet, 36 have assigned the company a Buy or equivalent rating, 16 rate it a Hold, and two have counseled investors to sell.
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