Netflix (NFLX) stock is seeing intense pressure on April 17 after the company’s muted Q2 guidance tempered a significant first-quarter earnings beat.
The post-earnings slump has NFLX hovering just above its 50-day moving average (MA), with a decisive break below $92 expected to accelerate bearish momentum in the near term.
Despite recent weakness, however, Netflix shares remain up roughly 25% versus their year-to-date low.
Guggenheim Maintains ‘Buy’ Rating on Netflix Stock
While Netflix’s current quarter outlook missed Street estimates on all three fronts: profit, revenue, and operating margin, Guggenheim recommends buying NFLX shares on the post-earnings dip.
On Friday, analyst Michael Morris maintained his “Buy” rating on the mass media giant, adjusting his price target to $120, indicating potential upside of more than 25% from here.
Speaking with CNBC, Morris said the current stock price weakness ignores “underlying strength” in the firm’s monetization strategy.
He remains bullish as Netflix has successfully raised U.S. prices while maintaining engagement at record levels.
According to him, with viewership satisfaction at an all-time high and retention improving globally, the platform’s pricing power remains a potent long-term lever for revenue growth.
Ads Business Momentum to Drive NFLX Shares Higher
A core pillar of Guggenheim’s bullish thesis on Netflix shares is the sheer pace at which the Nasdaq-listed firm is scaling its high-margin advertising business.
The company is already on track to double its ad revenue to about $3 billion this year, fueled by a 70% increase in the advertiser base.
Plus, NFLX’s free cash flow outlook received a $1.5 billion boost due to the termination fee from the failed WBD transaction. Morris views this massive cash cushion — now projected at $11 billion for the year — as a tool for aggressive capital returns or strategic acquisitions.
Note that Netflix has a history of closing May with a nearly 8% gain on average, a seasonal trend that makes it even more attractive to own in the near term.
What’s the Consensus Rating on Netflix?
What’s also worth mentioning is that Guggenheim is not the only Wall Street firm that’s keeping constructive on NFLX stock after the company’s Q1 earnings.
The consensus rating on Netflix also sits at a “Strong Buy” with the mean price target of roughly $116, indicating potential upside of nearly 20% from here.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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