Atlantic Equities boosted Netflix’s rating

An Atlantic Equities analyst upgraded Netflix stocks to Overweight, citing that the potential profit the company can generate from the new ad-supported subscriber tier is not reflected in the stock value.

According to the analyst, a new subscription plan could generate up to 8 billion in revenue in 2025, which could make up as much as 20 percent of total revenue.

As stated by him, some subscribers will downgrade their account to the new tier that will serve up ads. However, Netflix's high viewership will result in a downgrade to a cheaper ad-supported Netflix plan favorably impacting average revenue per user (ARPU). It will be influenced by high ad rates. The estimates show that average revenue per Netflix user in the U.S. could nearly double over the next three years. 

The rating decision was also affected by issued 2024 earnings per share (EPS) estimates for Netflix that were raised. Now Netflix is forecast to post 2024 earnings of $14.34 per share (compared to $12.71 earlier). Estimates for 2025 EPS were also improved. To reach the new target price of $283, a potential upside of 26% from current levels should be seen.