What happened
Shares of Netflix (NFLX 2.51%) jumped on Monday, surging as much as 10.4%. As of 2:06 p.m. ET today, the stock was still up 10%.
The catalysts that drove the streaming pioneer higher were not one but two upgrades courtesy of Wall Street's finest and word that the co-CEO has been loading up on shares.
So what
Citi analyst Jason Bazinet upgraded Netflix stock to buy from neutral (hold), while simultaneously adjusting the firm's price target down from $595 to $450. For context, that would represent roughly 17% gains for investors compared to Friday's closing price.
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The analyst cited the decline in the stock, noting it had come under substantial pressure in the wake of its fourth-quarter earnings report. However, he noted that an analysis of the enterprise value per subscriber indicate that, at the current price, investors are assuming that Netflix's growth will flatline, with no material subscriber growth or improvement is its user economics after 2023.
Bazinet wrote in a note to clients: "While Netflix ... may see more modest sub growth, we see other top-line vectors. For Netflix, we believe the firm has ample pricing power."
Edward Jones analyst David Heger was similarly inspired, upgrading Netflix to buy from hold.
Now what
There's another reason investors were feeling more bullish on Netflix. A recent filing with the Securities and Exchange Commission shows that co-CEO Reed Hastings used the recent decline in Netflix stock to load up on shares. Hastings added $20 million to his holdings, bringing his total share count to nearly 5.16 million shares.
There's been a flood of positive sentiment for Netflix courtesy of Wall Street since the company's quarterly subscriber miss sent the shares tumbling. Just last week, billionaire investor Bill Ackman of Pershing Square Capital Management announced he had acquired 3.1 million shares, saying that the recent sell-off had created a buying opportunity.
Given the company's history of lumpy subscriber increases, it's folly to suggest that Netflix's growth is over. In fact, the company has missed its own internal growth estimates on numerous occasions, only to come roaring back in the months that followed, and there's no evidence to suggest this time will be any different.
