CNBC’s Jim Cramer on Monday explained why he’s staying optimistic on Netflix, examining the bull and bear cases for the streamer by reviewing two recent analyst notes.
“Until we hear of anyone canceling their Netflix subscriptions, maybe because of price or about any real troubles with the advertising business … or about out-of-control costs in video games or live events — none of which have happened — then I think Netflix deserves the benefit of the doubt,” he said. “That’s why I’m sticking with the bullish side of this trade. The bear thesis, I don’t know; too hypothetical.”
Cramer compared reports from analysts at Barclays, who downgraded Netflix, and Piper Sandler, who upgraded the stock. He said these “analyst face-offs” can help investors take into account all the available information and determine where they stand.
According to the team at Barclays, Netflix may have trouble meeting its earnings goals, and the company’s “growth algorithm will come with tradeoffs.” And even if the streaming giant hits revenue targets, the analysts said Netflix’s valuation assumes it can double its subscriber base, which “seems unrealistic.”
Piper Sandler suggested “consensus margins could also prove to be conservative” in 2025 and 2026, saying the company is “a clear leader in streaming.” The analysts said Netflix can grow its subscriber base and has pricing power, adding that they’re optimistic on the streamer’s advertising potential.
Cramer said he disagrees with Barclays’ assertion that Netflix won’t meet revenue estimates, pointing out that the company has beat expectations over the past several quarters. And with the company set to stop reporting subscriber growth next year, it can now solely focus on growing revenue, he said, suggesting that will be its “new key metric.”
“With their ad business now ramping, plus additional revenue from paid sharing plans, the company has more optionality than ever when it comes to how they’re going to hit those revenue targets,” he said.
Netflix did not immediately respond to a request for comment.