Netflix’s stock surged by an impressive 16% following a promising quarterly earnings report that exceeded expectations. The streaming giant reported a significant 70% jump in its new ad-supported subscription tier, which was crucial to the company’s success. Netflix added 8.76 million subscribers in the third quarter, surpassing Wall Street’s estimated 5.49 million. This is the most significant increase in subscribers Netflix has seen since the second quarter of 2020, during the height of Covid stay-at-home restrictions.

Among the analysts celebrating Netflix’s triumph, Morgan Stanley upgraded the stock to overweight and increased its price target to $475. “We believe Netflix will deliver the objectives it set out a year ago, accelerate revenue growth back to double digits and expand margins,” Morgan Stanley commented in a Thursday analyst note. Similarly, Truist analyst Matthew Thornton expressed optimism about the streaming service’s future, citing the password-sharing crackdown as a potential driver of subscriber growth in the coming year. Thornton also upgraded Netflix to a buy rating and raised its price target from $430 to $465. In his note, Thornton said, “We upgrade to Buy with our thesis predicated on ongoing password sharing benefits (into 2024), advertising ramp (long-term), and share buybacks ($10b added), with top 3 tent-poles by 2025 (Squid Game, Wednesday, Stranger Things), with video games a free call option, and with optional growth levers available to NFLX.”

Netflix’s strategic introduction of an ad-supported subscription tier and crackdown on password sharing have significantly contributed to the company’s recent success, reflecting positively on the stock market. This promising trajectory highlights Netflix’s resilience and positions the streaming service for continued growth and innovation in the highly competitive entertainment industry.