Monday's analyst calls: Morgan Stanley sees more Netflix gains, Roku downgrade
[ad_1]
(This is CNBC Pro’s live coverage of Monday’s analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Two streaming stocks were in focus early Monday. Morgan Stanley raised its price target on Netflix , calling for more than 16% upside for the stock. Meanwhile, Seaport Research downgraded Roku shares, citing advertising growth headwinds for the company. Check out the latest calls and chatter below. 5:42 a.m. ET: Seaport Research Partners downgrades Roku Several industry-wide and idiosyncratic headwinds make Roku a tough stock to own, according to Seaport Research Partners. The research firm downgraded the streaming platform name to sell from neutral. Analyst David Joyce’s price target of $75 implies that the stock could fall 22% from its Friday close. Shares of Roku have soared more than 135% this year. As a reason for the downgrade, Joyce cited growth challenges from the broader media spending pullback due to the writers’ and actors’ strikes earlier this year. He thinks it could take a few quarters for the industry to revert back to normal, meaning that content release could still be stunted in 2024. Additional headwinds come from the newly-launched ad tiers of streaming rivals Netflix and Disney+. Joyce wrote that these could worsen over time, especially as Netflix begins introducing its ad tier to a global audience. The analyst also said Roku faces idiosyncratic challenges from lower digital ad growth. “Industry digital ad growth expectations recently marginally improved for 4Q23E and 2024E, but above our estimates for Roku, implying that the company could be losing share,” he said. — Lisa Kailai Han 5:42 a.m. ET: Morgan Stanley raises Netflix price target, downgrades Formula One Morgan Stanley analyst Benjamin Swinburne upped his price target on Netflix to $550 from $475, citing “increasing confidence in the company’s return on content spending, execution on growth initiatives including paid sharing and advertising, and the pull-back in competitive intensity in broader Media.” “We base our growth outlook and investment thesis on three factors: 1) engagement and execution, 2) competition and cost of capital, and 3) a more measured expectation around advertising in particular in nearterm estimates,” Swinburne added. Netflix shares have rallied 60% this year, and Swinburne’s price target calls for upside of 16.5% from Friday’s close. NFLX YTD mountain NFLX in 2023 Separately, Morgan Stanley downgraded Liberty Media Formula One Class C shares to equal weight from overweight. The bank also cut its target on the stock to $70 from $80, implying upside of just 8.7% from Friday’s close. Swinburne called Formula One a “victim of its own success.” The sport’s popularity has exploded in recent years, especially in the U.S., thanks in part to Netflix’s “Drive to Survive” docuseries. “The result of all this success is that earnings have to some extent been optimized,” the analyst said. “While we still see continued strong growth ahead, that growth is going to invariable decelerate from what investors have seen in the past five years.” Class C shares of Formula One are up 11% year to date. Since 2019, they have more than doubled. — Fred Imbert
[ad_2]
