Netflix (NFLX) stock surged higher on Thursday amid reports of healthy subscriber growth for its advertising-subsidized streaming video service and increased investment in its nascent mobile video game business.
XIn afternoon trading on the stock market today, Netflix stock climbed 7.5% to 315.98. Netflix stock is attempting to retake its 50-day moving average line, according to IBD MarketSmith charts. It fell below that key support level on Feb. 23.
The internet television network has gotten a lift from several news reports this week.
Bloomberg reported Sunday that Netflix's lower-cost, ad-supported service tier had reached 1 million monthly active users just two months after launch. Netflix also has fulfilled its forecast deliveries to advertisers, sources told Bloomberg.
Netflix says the new service level with ads isn't cannibalizing its ad-free premium service levels. Most of the people signing up for the ad tier are new customers or lapsed customers, not people who immediately changed plans, Bloomberg said.
Advertising, Gaming Businesses In Focus
Meanwhile, Netflix is considering a potential shift away from ad tech and sales partner Microsoft (MSFT), Digiday reported last week. Netflix is thinking about bringing ad tech operations in-house when its deal with Microsoft ends next year. However, Netflix could decide to renew its pact with Microsoft.
Elsewhere, Netflix continues to invest in making mobile video games for subscribers to play when they aren't watching TV shows and movies.
Netflix plans to have a lineup of 95 games available to play by the end of 2023, Variety reported on Monday. It currently offers about 55 games for smartphones and tablets. Plus, it has 40 more set for release later this year.
Netflix Stock Retains Buy Rating
In a note to clients on Monday, JPMorgan analyst Doug Anmuth reiterated his overweight, or buy, rating on Netflix stock. He kept his price target at 390. Anmuth recommended that investors buy the pullback in Netflix shares.
However, subscriber pushback to Netflix's password-sharing crackdown remains a near-term headwind, he said. Netflix has rolled out its paid-sharing program in select international markets, including Canada, New Zealand, Spain and Portugal. It has not launched the program yet in the U.S.
"Regardless of the exact timing, we expect Netflix to continue down the path of transitioning users away from widespread account sharing, making select policy and customer service tweaks along the way to reduce friction," Anmuth said.
The paid-sharing initiative ultimately should generate more revenue through new accounts, he said.
Netflix Stock Is Tops In Industry Group
Anmuth likes Netflix stock for its large subscriber base, improving free cash flow and profit margins.
"Netflix is a key beneficiary and driver of the ongoing disruption of linear TV, with the company's content performing well globally and driving a virtuous circle of strong subscriber growth, more revenue and growing profit," he said.
Netflix stock ranks first out of 21 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 84 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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