Why Netflix Stock Is Surging Today

Netflix (NASDAQ: NFLX) stock is moving higher in Monday's trading following bullish analyst coverage. The company's share price was up 3.7% as of 10:45 a.m. ET and had been up as much as 4.7% earlier in trading.

MoffettNathanson published new coverage on Netflix this morning, raising its rating on the stock from neutral to buy. Robert Fishman, the firm's lead analyst on the company, also raised his one-year price target on the stock from $850 per share to $1,100 per share.

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Netflix stock is getting a boost from bullish analyst coverage

In its coverage today, MoffettNathanson said it thinks the market is still undervaluing Netflix's ability to monetize its large user base and engagement. The firm sees the streaming specialist improving its tech capabilities and taking advantage of advertising opportunities as it continues to grow its user base. Even with today's gains, Fishman's new price target on Netflix still suggests potential upside of roughly 16%.

What comes next for Netflix?

Netflix stock is now up roughly 58% over the last year and is trading at approximately 38 times this year's expected earnings. That's a growth-dependent valuation, but the company has been posting impressive sales and earnings momentum lately. With the company raising prices on subscriptions and incorporating ads, Netflix is showing strong pricing power.

Fishman expects that Netflix will grow its annual advertising revenue at roughly 37% compound annual growth rate (CAGR) from 2024 to 2030, with revenue rising from $1.5 billion to more than $10 billion at the end of the period. If the company successfully scales its ads business, it could have a major positive impact on profit margins and translate to strong earnings growth.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.