Blowout earnings aren’t the obvious time for a downgrade.
Yet Deutsche Bank, while lifting its price target on Netflix to $525 from $460, has downgraded its rating on the streaming leader to hold from buy.
Netflix shares
NFLX,
rallied 9% to $539 in premarket trade on Wednesday.
Read: Netflix stock jumps on huge spike in new subscribers, surge in ad sales
“Netflix is still the best story in media among the vertically integrated producers/programmers/distributors,” said Bryan Craft, a Deutsche Bank analyst.
“However, we think that Netflix’s leadership position is fully priced into the stock at these levels with Netflix trading at 32x 2024E / 27x 2025E EPS, which we see as leaving little room for multiple expansion given what we think will be peak EPS growth in 2024 (at 38%); decelerating to 21% and 16% in 2025 and 2026, respectively.”
The note said there will still be some benefit to 2024 results from the crackdown on sharing, but said the low-hanging fruit has been harvested.
Advertising is still in its early days and “2024 will be more about growing the ads tier base and building out the international sales effort than scaling ad revenue in a meaningful way,” he said.
This story originally appeared on Marketwatch
