The dramatic pullback in tech stocks has gone far enough for Spotify and Netflix , according to Citi. Analyst Jason Bazinet upgraded both stocks to buy from neutral, saying in a note to clients Monday that the companies had more levers to pull to increase revenue in the coming years ahead. "While Netflix and Spotify may see more modest [subscriber] growth, we see other top-line vectors," Bazinet wrote. "For Netflix, we believe the firm has ample pricing power. For Spotify, we believe the firm can improve ad-supported monetization." The upgrade comes after tech stocks have been hit hard in recent months. However, the pullback has gotten to the point where some of the subscription-based businesses look cheap, according to Citi. "Subscriber-based stocks have come under significant pressure. Since January 2020, across our subscription-based universe, equity returns now lag the S & P 500," Bazinet said. "Our EV per sub analysis suggests prevailing equity values don't assume material sub growth or improving subscriber economics beyond 2023." Despite the upgrades, Citi did cut its price targets for both stocks. The target for Spotify fell to $240 per share from $275, while the target for Netflix dropped to $450 per share from $595. Those targets are roughly 39% and 17%, respectively, above where the stocks closed on Friday. Spotify, which has been embroiled in a controversy recently over the Joe Rogan podcast it hosts, saw shares rise 1.7% in premarket trading. Netflix was up 3.4% premarket. —CNBC's Michael Bloom contributed to this report.
People walk by the New York Stock Exchange (NYSE) on the morning that the music streaming service Spotify begins trading shares at the NYSE on April 3, 2018 in New York City.
Spencer Platt | Getty Images
The dramatic pullback in tech stocks has gone far enough for Spotify and Netflix, according to Citi.