An analyst called it a mistake to downgrade Netflix. He now recommends buying the stock

Loop Capital changed its recommendation on shares of streaming service Netflix from "hold" to "buy", pointing to strong audience engagement metrics, a revitalized content portfolio and margin growth. Analyst Alan Gold said projects such as "Squid Game 3," "Wanzday 2" and "K-Pop: Demon Hunters" have strengthened the company's position, and he called its decision to downgrade in December a mistake. "Netflix won the streaming wars," Gold is now confident.

Investment bank Loop Capital upgraded its rating on shares of streaming giant Netflix, improving the recommendation from "Hold" (Hold) to "Buy" (Buy), CNBC writes. In addition, analyst Alan Gold increased the target price of the stock from $1150 to $1350, which implies a potential upside of another 12% from the current level.

The company's shares jumped 2% at the moment in trading on Sept. 17, and they have added 37% since the beginning of the year.

Gold noted the company's strong fundamentals. "Our downgrade on Netflix in mid-December, when the stock was around $900, turned out to be a mistake. But after a strong first half of the year, the stock stood pat last quarter. At the time of our downgrade, [Netflix] management was forecasting revenue growth of 11-13% in 2025; expectations are now 16-17%," the analyst said.

Loop Capital attributed the return to a buy recommendation to "exceptional audience engagement performance in the third quarter, a strong content portfolio for the fourth quarter and higher long-term margin expectations." According to Gold, "every dollar invested in content generates more revenue, leading to higher margins and free cash flow."

The analyst noted that Netflix's audience engagement growth was driven by projects such as the third season of "The Squid Game," the second season of "Wenzday" and the animated movie "K-Pop: Demon Hunters." Gold also raised expectations for third-quarter results: he predicted that management will raise its full-year revenue guidance even higher. He recalled that Netflix exceeds its own sales guidance about 75% of the time.

Gold also emphasized Netflix's dominance as an entertainment giant despite stiff competition. According to the analyst, investors are "overly concerned" about potential rivals.

"Netflix has won the streaming wars, and even with increased competition from David Ellison's Paramount Skydance, we believe Netflix has the global audience and content scale, technological advantage and cash flow to maintain growth and leadership," he wrote.

Last week, Jefferies analyst James Heaney maintained a positive assessment and called Netflix stock an attractive buying opportunity. He left his target price unchanged at $1500. His estimate implies a 25% rise in the company's stock.

Most analysts are optimistic: of the 54 experts tracking the stock, 35 recommend buying (Buy and Overweight ratings), 17 are neutral (Hold) and only two advise selling (Sell).

This article was AI-translated and verified by a human editor