Exploding earnings are not a good time for a rating downgrade.
However, Deutsche Bank, despite raising its price target on Netflix to $525 from $460, lowered its rating on the streaming leader to Hold from Buy.
Netflix stock at NFLX,
It rose 9% to $539 in premarket trading on Wednesday.
is reading: Netflix stock is jumping due to a surge in new subscribers and increased ad sales
“Netflix remains the best story in media among vertically integrated producers/programmers/distributors,” said Deutsche Bank analyst Brian Kraft.
“However, we believe Netflix's leadership position is fully priced into the stock at these levels with Netflix trading at 32x 2024E / 27x 2025E EPS, which we view does not leave much room for multiple expansion given what we believe will be peak EPS growth in 2024.” (by 38%), and it will slow to 21% and 16% in 2025 and 2026, respectively.
The memo said there would still be some benefit to the 2024 results from the crackdown on participation, but said the low-hanging fruit had been harvested.
Advertising is still in its early days, he said, and “2024 will be more focused on growing the base of ad levels and building international sales efforts than increasing ad revenue in a meaningful way.”
