What happened
Shares of Netflix (NFLX 0.92%) rose by a shade under 5% on Wednesday, topping the performance of the surging S&P 500 index, which gained about 3.6%. Investors were cheered when a longtime Netflix bear lost some of his grumpiness and upgraded his recommendation on the stock.
So what
The analyst in question is Wedbush's Michael Pachter, who has attracted some notoriety for being a top Netflix bear. It seems he's warming up to the company a bit: On Wednesday, he upped his recommendation on its shares from underperform (read: sell) to neutral. He kept his price target the same, though, at $342 per share.
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There's a notable caveat here, though: Pachter's revised view on the video streaming giant is based mainly on the recent sell-off in its stock.
"The recent share price decline reflects that Netflix investors have begun to appreciate that the company's long-term prognosis is as a low growth, extremely profitable enterprise," he said in his latest note.
In January, Netflix published fourth-quarter earnings that disappointed investors. Its all-important subscriber growth figure came in lower than the company had forecast, while its first-quarter revenue guidance also fell short of analysts' consensus estimates. The stock hasn't yet recovered from investors bailing on it following the earnings release.
Now what
Pachter remains somewhat bearish about the short-term prospects for Netflix's stock price to rise significantly. But he sees its long-term potential as a different story.
"Netflix's first mover advantage and large subscriber base provides the company with a nearly insurmountable competitive advantage over its streaming peers," he said.
