UBS Raises Netflix's Price Target Ahead Of Earnings, Expecting Shares To Jump Nearly 20%

According to UBS, investors can anticipate a strong performance from Netflix during the upcoming earnings season. Analyst John Hodulik has raised the price target on Netflix shares to $525 per share, up from $390, in anticipation of the company's second-quarter results. Hodulik predicts that the report will showcase robust growth in the second half of the year.

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The revised price target suggests a potential upside of 19.3% compared to Tuesday's closing price. In premarket trading, Netflix shares rose by 0.6%.

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Hodulik's positive outlook is based on favorable data related to paid sharing, a recent addition to the platform. Engagements, downloads, and search interest in the newly launched paid sharing markets have all yielded encouraging results. Hodulik stated, "Along with better foreign exchange rates, we expect the second quarter to surpass management's guidance (projected 5% revenue growth and 4% operating income growth; previously 4% and 2%) and we still anticipate accelerated growth in the second half."

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While Netflix shares have already demonstrated strong performance this year, with a nearly 50% increase, Hodulik attributes his optimistic view to the success of paid sharing, which positions Netflix as a significant beneficiary as streaming platforms prioritize profitability.

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Hodulik believes that paid sharing will contribute to over a 5% revenue uplift and sees its implementation as pivotal for expanding advertising scale through a growth in the ad-tier mix and improved targeting. He further notes that Netflix eliminated its basic ad-free tier in Canada (and reduced its emphasis in the US), a move that is estimated to potentially increase average revenue per user (ARPU) by 10% over time. This adjustment is expected to expedite the expansion of the advertising base beyond previous expectations.

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Netflix is scheduled to release its second-quarter results on July 19.

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