Is Netflix's momentum moving faster than its stock price? This analyst thinks so.

Seaport Research Partners has upgraded the stock to buy, arguing that Netflix's ad business is poised to soar and that the market had already absorbed the company's prior big gains Seaport Research Partners believes Netflix is set to unleash huge growth through the development of its ad-supported subscription tier. Just when you might think the market has cooled its jets a bit over Netflix Inc.'s stock, one analyst is betting that the company is set to soar once again. Seaport Research Partners is arguing that Netflix's (NFLX) ad business is on the brink of a major boom that should send the stock way up in the coming months. They've upgraded the stock to buy and set a price target of $1385. Netflix shares are up close to 3% today at just shy of $1200 a share in midday trading. That's down nearly 11% from the stock's all-time high at the end of June as traders began wondering if the share price had gotten ahead of the company's big push for growth. "We think the shares' momentum, which has moderated lately, could be digesting the [year-to-date] +30% gains ahead of the advertising infrastructure build-related monetization momentum," Seaport's David Joyce wrote in a note to clients. He said that Netflix is set to turn on the afterburners by developing a lower-cost, ad-supported subscription tier. After years of building out the infrastructure to support its ability to serve up ads to viewers, Joyce said Netflix could double its ad revenue to $3.1 billion this year and could push it as high as $16 billion by 2030. Last year, Netflix reported $39 billion in revenue, up nearly 16% from the year before. Joyce also believes that the market has largely absorbed the rapid growth Netflix reported in the first half of this year - second-quarter net income rose 45% year-over-year and revenue jumped 16% - and that the stock is a strong buy ahead of third-quarter earnings due on Oct. 21. "While we are still somewhat concerned that larger competitors such as Amazon Prime have, in some instances (France) been able to move faster than Netflix in certain aspects of testing ad models and partner content, we believe the usage of Netflix and content quality will continue to drive significant growth," Joyce wrote. Many analysts expect Netflix's ad-supported business would become a key driver of growth. The lower-priced package-which costs $7.99 a month, compared with $24.99 a month for a premium ad-free package-has enabled Netflix to attract a large number of new customers or keep more customers who might have been inclined to drop the service. Earlier this year, the Wall Street Journal reported that Netflix internally had set the ambitious target of doubling its revenue by 2030 and reaching a market capitalization of $1 trillion. The company's current market valuation is around $494 billion. The company aims to have 400 million global subscribers by then, up from just over 300 million at the end of 2024. Netflix is also aiming to triple its annual operating income by 2030 from around $10.4 billion last year, the Journal reported. -Lukas I. Alpert This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

Is Netflix's momentum moving faster than its stock price? This analyst thinks so.

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