Is Netflix Headed Back To $300? Here's Why Wells Fargo, BMO Say Yes

Netflix, Inc. NFLX rallied Wednesday following a second-quarter earnings beat, but at least two Wall Street analysts say the stock is headed much higher.

The Netflix Analyst: BMO Capital Markets analyst Daniel Salmon reiterated an Outperform rating and $365 price target for Netflix. 

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The Netflix Takeaways: On Wednesday, Salmon said Netflix's subscriber growth is stabilizing and its free cash flow is increasing, making Netflix an attractive "growth at a reasonable price" (GARP) stock pick.

"Both 2Q actual and 3Q guidance for subs/members were good enough, and the FCF outlook had more color added: from consistently FCF positive to +$1 billion in 2022 and substantial growth in 2023," Salmon said.

He said Netflix management provided much-needed clarity on the company's new initiatives, including advertising and a password sharing crackdown. Salmon said consensus analyst estimates of $1.7 billion in 2023 free cash flow for Netflix seem too low at this point.

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The Netflix Analyst: Wells Fargo analyst Steven Cahall reiterated an Equal Weight rating and $300 price target for Netflix.

The Netflix Takeaways: Cahall isn't quite as bullish as Salmon, but he still sees Netflix getting back to $300 as it navigates near-term headwinds. He said Netflix shares have likely found a bottom as long as the company can maintain moderate subscriber growth.

"Next year new initiatives will start to contribute, and it's reasonable to expect the NFLX of 2024 and beyond will have very healthy top- and bottom-line growth + better FCF," Cahall said.

For now, he said he's more comfortable on the sidelines when it comes to Netflix given the significant execution risks the company is facing in the quarters ahead. 

Benzinga's Take: Netflix may not be the growth stock it once was, but it still reported 8.6% revenue growth in the second quarter and guided for 1 million global net new subscriber additions in the third quarter. Even after Wednesday's rally, Netflix shares trade at just 17.2 times forward earnings estimates.

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