Todd Spangler NY Digital EditorNetflix and Spotify shares both popped Monday after Citi analysts upgraded both stocks to buy ratings, saying the market is undervaluing their longer-term upside.Shares of both companies climbed in early trading Monday, with Netflix up more than 6% and Spotify up more than 5%.In the previous 30 days, Netflix shares had slumped 32% and Spotify dropped 26% on investor concerns over slowing streaming subscriber growth.
The selloff “suggests prevailing equity values don’t assume material sub growth or improving subscriber economics beyond 2023,” the Citi team led by Jason Bazinet wrote in a research note in upgrading the stocks from “neutral” to “buy.”“While Netflix and Spotify may see more modest sub growth, we see other top-line vectors,” the analysts wrote. “For Netflix, we believe the firm has ample pricing power.
For Spotify, we believe the firm can improve ad-supported monetization.” Netflix shares plunged following its fourth-quarter 2021 earnings report, in which it forecast a much smaller-than-expected subscriber gain in the first quarter of 2022.The stock rise Monday also comes after Netflix co-CEO Reed Hastings bought $20 million worth of stock, disclosed after the market closed Friday.
It was Hastings’ first open-market purchase of Netflix shares since the company’s 2002 IPO, in a show of confidence in the stock.
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