Netflix Sentiment Improving Ahead of Ad Tier Launch - JPMorgan

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By Sam Boughedda

A JPMorgan analyst maintained a Neutral rating and $240 price target on Netflix (NASDAQ:NFLX) in a note Wednesday but said investor sentiment and interest are picking up ahead of its ad tier launch.

"w/NFLX appointing Jeremi Gorman as President of Worldwide Advertising & Peter Naylor as VP of Advertising Sales. We believe both execs were critical in building out SNAP's advertising efforts—w/Gorman at AMZN & Naylor at Hulu prior—and they bring much-needed advertising DNA & industry relationships to NFLX's offering," explained the analyst.

"NFLX shares have traded up +8% since reporting 2Q earnings (vs. the SPX flat), & our discussions suggest investor sentiment & interest—while still mixed—are picking up toward the launch of the ad-supported subscription tier, likely in 4Q," he added.

The analyst said the key focus areas for them are the upcoming advertising and paid sharing launches, cost discipline and meaningful free cash flow generation, and limited visibility on the second half and 2023 subscriptions.

"We continue to believe NFLX has urgency around both accelerating Revenue growth & increasing FCF, & the recent hires of Jeremi Gorman & Peter Naylor from Snap should provide greater confidence in monetizing the ad tier," concluded the analyst.

Netflix shares are up over 2% so far Wednesday.