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Netflix Stock: Next Stop, $740?

By Rick Munarriz – Oct 11, 2021 at 11:30AM

Key Points

  • Credit Suisse bumps its price target to $740, but it's not even the high-water mark.
  • Netflix reports third-quarter results next week, and at least four analysts have increased their price targets ahead of the earnings call.
  • A new merchandising partnership with Walmart and the development of gaming initiatives make Netflix more than just a streaming video play.

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An analyst jacks up the price target on the streaming giant ahead of next week's earnings report.

We're living in a Netflix (NFLX 3.74%) world, and Wall Street is just trying to keep up. Shares of the company behind the world's leading premium streaming service hit fresh all-time highs last week, and with its next quarterly earnings release just around the corner, a few analysts think that Netflix stock is going even higher. 

Douglas Mitchelson at Credit Suisse boosted his price target from $643 to $740, a move that suggests 17% of upside from current levels. He accepts that the stock running up into next week's financial update gives Netflix little room for error, but a third-quarter miss seems unlikely in his view. Netflix is typically conservative with its guidance, but exceeding the 3.5 million in sequential net additions that management put out in July for the third quarter is a slam dunk at this point. 

Mitchelson believes that the global success of Squid Game in recent weeks -- the South Korean survivalist series that Netflix will likely announce has overtaken Bridgerton as the platform's most watched show -- should bode well for guidance for the quarter that began earlier this month. In short, Netflix stock should more than live up to the hype when it reports next Tuesday afternoon, Oct. 19. 

A smiling person with a remote control watches TV while reaching for some popcorn.

Image source: Getty Images.

A rising tide lifts all streams

Mitchelson isn't alone in boosting his price target. Benchmark, Guggenheim, and KeyBanc join Credit Suisse in jacking up their price goals for the stock over the past two weeks. Credit Suisse at $740 on Monday isn't even the high-water mark here. Hamilton Faber at Atlantic Equities increases his price target on the stock from $690 to $780 in early September. 

The euphoria may seem odd at first. The other prolific players in streaming video entertainment aren't tickling new highs right now. Netflix itself stumbled the last time it reported financials results. Investors were concerned with Netflix posting a 400,000 sequential dip in U.S. and Canada subscribers during the second quarter, a weak period for streaming services in general as widespread COVID-19 vaccinations gave folks the freedom to step out of the living room and get back to real-world diversions. 

Sentiment has clearly improved lately. Folks are heading back to work and kids returned to school, but that means more opportunities to chat up rising Netflix shows and films by the water cooler or in the classroom. 

It's not just Squid Game driving the autumn rally in the shares. Netflix has a healthy pipeline of content to keep subscribers close and non-subscribers jealous. There's also the gaming initiative that Netflix announced over the summer but has yet to put into action, and the new retailing initiative it announced with Walmart (WMT 0.62%) on Monday to ramp up the merchandising opportunities behind some of the streaming platform's popular shows. 

Netflix continues to be the top dog among streaming service stocks. Bears will argue that the shares are priced for perfection at this point, but Netflix is a company that historically knows how to blow a hole through the ceiling. With gaming and merchandising opportunities now in play beyond its flagship streaming juggernaut, it's likely more risky to bet against Netflix than to bet on it at all-time highs.

Rick Munarriz owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

Stocks Mentioned

Netflix Stock Quote
Netflix
NFLX
$316.95 (3.74%) $11.42
Walmart Stock Quote
Walmart
WMT
$153.37 (0.62%) $0.95
Credit Suisse Group Stock Quote
Credit Suisse Group
CS
$3.09 (-5.79%) $0.19

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