Here's what every major analyst said about Netflix's fourth-quarter earnings report

Published Wed, Jan 20 20216:40 AM ESTUpdated Wed, Jan 20 202111:35 AM EST

Wall Street analysts believe Netflix shares have even further to go after the company's stock popped on a host of positive surprises in its fourth-quarter earnings report. To be sure, analysts believed it wasn't a perfect but the signs are coming together that the streaming giant is becoming a more mature company according to analysts. The stock surged following the report with shares now up almost 15% in midday trading. Two major firms (Wells Fargo and UBS) upgraded the stock following the report. Netflix made several announcements which delighted both analysts and investors alike, including that it was nearing free cash flow profitability with the possibility of share buybacks at some point. Though the company did fall short of earnings per share estimates it beat on revenue and alleviated a long-standing concern of analysts and shareholders by reporting subscriber additions. Here's what the analysts are saying about the company's earnings report: "Subscriber growth and cash ﬂow outlook exceed expectations," Goldman Sachs analyst Heath Terry said in his note to clients after the results. Despite some concerns surrounding the impact of the coronavirus, Terry said this earnings report shows there's still more upside in the stock. "We expect that Netﬂix's massive content investments, global distribution ecosystem and improving competitive position will further drive ﬁnancial results signiﬁcantly above consensus expectations," he said. This quarter also proved that the subscriber addition fears were overdone Piper Sandler analyst Yung Kim said. The firm acknowledged Netflix added a lot of customers due to the pandemic but said home viewing was here to stay. "We recognize that stay-at-home regulations have been a significant tailwind for Netflix and other streaming video services, but we view the 2020 spike in net adds as an acceleration of consumer content dollars shifting from traditional TV to streaming," he wrote. And while the subscriber beat will garner the attention it was Netflix's transition to profitability which should excite investors the most even if the stock is fickle in the near term, according to Jefferies analyst Alex Giaimo. "We believe LT bulls will be rewarded," he said. The feeling was similar at investment firm UBS. The firm upgraded the stock to buy from neutral and said Netflix is finally putting together the right mix of "global sub growth, continued levels of content investment & a multi-yr margin & FCF narrative," analyst Eric Sheridan said. "While the shares may remain volatile due to qtrly sub performance, we now see a more compelling positive risk/reward than in mid-2020," Sheridan wrote. Wells Fargo also upgraded the stock to overweight from equal weight overnight and said competitors will be hard pressed to keep up. "We've gone from a historical bear on NFLX to a card-carrying bull," analyst Steven Cahall said. Even Credit Suisse analyst Doug Mitchelson said he had to give Netflix its due though he wasn't ready to move on from his neutral rating on the stock and recommended investors wait for a better entry point. "Netflix hammered the final nail in the bear case coffin," he said. Loop- Buy rating "We thought that near-term subscriber expectations were not high and that the set-up on the stock was favorable into results. We have for some time believed that 2021 profitability targets suggested by management were too low and likely to be exceeded. We also believe we were early in calling for a pivot in narrative to uses of excess cash and that management would commit to shareholder friendly paths, most likely stock repurchase." Barclays- Overweight rating, price target to $650 from $550 "Solid beat; guidance could prove conservative: Despite Covid-19 driven growth pull forward concerns as well as price increases during the quarter in certain geographies, Netflix put up significantly better than expected subscriber performance in Q4. While the company guided to a sequentially slower Q1, opposite of prior year trends, this feels conservative in light of Q4 performance and the company's Q1 content slate and could imply further price increases in other regions." Deutsche Bank- Buy rating "We believe Netflix is an attractive multiyear growth story and that it offers additional optionality in the form of pricing power, success in southeast Asia (namely India), margin upside, and potential new ancillary revenue streams. Netflix is no longer just a revenue growth story with positive FCF and share repurchases on the horizon." Raymond James- Market perform rating "In all, a strong quarter after a setback in 3Q20; though we are not through the pandemic and its potential impacts on Netflix and the streaming landscape at large, Netflix has shown its ability to navigate these challenges. Though this quarter was decidedly positive, we maintain our Market Perform rating as we believe shares are appropriately valued at ~8x 2021 revenue given our growth outlook of ~20% for 2021." Wells Fargo- Upgraded to overweight from equal weight and price target tro $700 from $510 "We've gone from a historical bear on NFLX to a card-carrying bull. The pandemic supported stronger subscriber acquisition, but what has really impressed is how unit economics are coming through. Getting into the weeds of customer lifetime value (CLV) we see better margins and cash returns that justify a structural re-rating based upon $1,300+ 20-year CLV. NFLX's leadership position gives it ample flexibility, now including buybacks. Few competitors will be able to keep up since 200mm+ subs is perhaps the bar for decent returns, so this is rarified air." Morgan Stanley- Overweight rating, price target to $700 from $650 "After a debt funded business model shifting from licensed to original programming over the past five years, Netflix has scaled to a self-funded and now a highly FCF generative business. This will strengthen its competitive position, reduce the risks to the business, and reinforce our OW view. ... .We have long believed that as the business scaled and its transition to self-produced content played out, this business would move to sustained and substantial annual FCF. That moment has arrived." Piper Sandler- Overweight rating, price target to $652 from $643 "We recognize that stay-at-home regulations have been a significant tailwind for Netflix and other streaming video services, but we view the 2020 spike in net adds as an acceleration of consumer content dollars shifting from traditional TV to streaming. While mitigation of Covid rules will likely slow the accelerated growth, we do not anticipate a sudden drop-off of subscribers globally." JPMorgan- Overweight rating, price target to $685 from $628 "NFLX Increased its 2021 Operating Income & FCF Guide, with Potential Share Buybacks Starting in 2H21. We expect NFLX to continue benefitting from the global proliferation of Internet-connected devices and increasing consumer preference for on-demand video consumption over the Internet, with NFLX approaching 300M global paid subs by 2024." Cowen- Outperform rating, price target to $675 from $650 "We view NFLX as a pioneer in online streaming, with further expected growth in subs in the US and expectation for long-term sub growth internationally in existing and new markets. At scale, NFLX subs have very high incremental margins (~80-85%), which should provide margin upside longer term." KeyBanc- Overweight rating, price target to $650 from $634 "Whereas many media companies face FCF headwinds from entering streaming video, Netflix is transitioning to FCF profitability. This creates a profile of highteens revenue and 40%+ EPS growth profile through 2022E before controlling for accretion from share repurchases. Bottom line, we continue to view risk/reward as compelling." Oppenheimer- Outperform, price target to $620 from $550 "While 1Q sub outlook was 2.6M below Street forecasts, we believe this was more a byproduct of 4Q subs 2.5M ahead of Street estimates. Meanwhile, the company is on a clear trajectory toward improving margins, albeit FY21 guidance is likely conservative on FX, FY of COVID safety costs, resumption of hiring and timing of content releases. Lastly, we believe NFLX will expand on its content advantage even more in 2021, with 500 titles in post-production and one original movie expected to be released per week." Pivotal- Buy rating, price target to $750 from $660 "NFLX reported a nicely better than expected 4Q subscriber and financial results, conservative 1Q subscriber guidance, a better than expected 1Q financial forecast, management officially confirmed they no longer need outside capital to fund their business, and raised their '21 free cash flow forecast to flat from negative $1B. ... .We remain bulls on the Netflix story as NFLX offers consumers an increasingly compelling unique entertainment experience on virtually any device, w/o commercials at a still relatively low cost." Jefferies- Buy rating, price target to $650 from $610 "While the 4Q sub beat will garner most of the attention, we believe the improved FCF commentary and future capital independence is the more important positive takeaway. NFLX has been working towards this moment for multiple years, and is now in the unique position to continue its aggressive content spend while still generating significant future cash flows. Quarterly results are likely to remain volatile, but we believe LT bulls will be rewarded." Baird- Outpeform rating, price target to $650 from $600 'The story was 1) the commentary on sustainable free cash flow and plans to explore buying back stock with excess cash flow, and 2) guidance for 20% operating margins in 2021, which is helping drive the FCF improvement. Content viewership generally remains strong, and with more content prepped to launch in 2021 YOY, including a new movie every week, we expect NFLX to continue to grow viewership share." Rosenblatt- Neutral rating, price target to $450 from $425 "NFLX reached a major milestone in their evolution as a company, no longer expecting to need to rely on external financing, roughly 1 year earlier than we anticipated. While this is supportive for the company, our FCF concerns are not solved given the upside risk to content costs we see from rising competition." UBS- Upgraded to buy from neutral and price target to $650 from $540 "While recent qtrs. & fwd commentary remains volatile on the prospect of sub growth in a post-COVID-19 envt, we think the main messages from the Q4'20 EPS were continued strong global sub growth continued levels of content invtmt & a multi-yr margin & FCF narrative that is more explicit from mgmt comments and which is likely to attract interest from investors ready to marry growth & valuation multiple. ... .While the shares may remain volatile due to qtrly sub performance, we now see a more compelling positive risk/reward than in mid-2020." Goldman Sachs- Buy rating, price target to $710 from $670 "With NFLX shares essentially ﬂat over the last six-months vs. the S & P 500 +17% and GS US Stay at Home basket +19%, we believe the scale of Netﬂix's subscriber opportunity beyond the current crisis, as well as the option value in a platform with video connections into the homes and devices of over 200mn subscribers, goes well beyond NFLX's current share price. Despite near-term COVID-related uncertainty, we expect that Netﬂix's massive content investments, global distribution ecosystem and improving competitive position will further drive ﬁnancial results signiﬁcantly above consensus expectations." Stifel- Buy rating, price target to $550 from $520 "Notably, the company now expects FCF breakeven in 2021 (from -$1B to breakeven previously) and believes it no longer requires external financing to fund ongoing operations. The company will explore returning cash to shareholders through ongoing stock buybacks as it generates excess cash. We predict the company's subscriber base will double to 400mm by 2030, a good outlook, though in the near-term we view the opportunity in shares as balanced." Bank of America- Buy rating, price target to $680 from $670 "Results show strengthening position long term; Buy. We see Netflix ability to continue to grow despite added competition, live sports, and a significant 1H pull-forward as an indication they are strengthening their value prop to consumers and see a long runway to continue to increase market share from linear TV and believe they are in a strong position to continue price increases in 2021." Guggenheim- Buy rating, $625 from $595 "We maintain our view that Netflix has a strong runway for incremental growth, particularly given the company's proven ability to globally scale its content investments (e.g., French-produced Lupin reaching 70mm global viewing members –) and current trajectory of subscribers, which we view as underpenetrated in terms of global broadband households. The chart below details our international broadband-household penetration estimates." Credit Suisse- Neutral rating "Netflix hammered the final nail in the bear case coffin: stock repurchases should begin in 2H21. The stock buybacks are not material – we see $22.5B the next 5 years vs. its ~$260b market cap, but rather represent an important inflection point in the maturation of its business model. ... . Netflix's valuation is not inexpensive either. Notwithstanding bulls seeing the 1Q guide as overly conservative, 2021 will be a long year and other entry points will likely present themselves."

CEO Of Netflix, Reed Hastings, attends the red carpet during the Netflix presentation party at the Invernadero del Palacio de Cristal de la Arganzuela on April 4, 2019 in Madrid, Spain.

Juan Naharro Gimenez | Getty Images

Wall Street analysts believe Netflix shares have even further to go after the company's stock popped on a host of positive surprises in its fourth-quarter earnings report.

To be sure, analysts believed it wasn't a perfect but the signs are coming together that the streaming giant is becoming a more mature company according to analysts.

The stock surged following the report with shares now up almost 15% in midday trading. Two major firms (Wells Fargo and UBS) upgraded the stock following the report.

Netflix made several announcements which delighted both analysts and investors alike, including that it was nearing free cash flow profitability with the possibility of share buybacks at some point.

Though the company did fall short of earnings per share estimates it beat on revenue and alleviated a long-standing concern of analysts and shareholders by reporting subscriber additions.

Here's what the analysts are saying about the company's earnings report:

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Here's what every major analyst said about Netflix's fourth-quarter earnings report

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