Investors should buy Netflix into its earnings report next week even after its stunning gains this year, according to one top Wall Street firm.
Goldman Sachs reaffirmed its buy rating and raised its price target for Netflix shares to the highest on Wall Street, predicting the video streaming giant will post subscriber gains above expectations over the next two quarters.
“We believe consensus subscriber estimates for Netflix ahead of Monday’s earnings remain too low, particularly for the quarter, 4Q, and beyond,” analyst Heath Terry wrote in a note to clients Friday.
“As we wrote at the beginning of the year, content remains the primary driver of subscriber growth and engagement (and the pricing power that comes with it).”
Netflix is slated to report third quarter earnings on Monday, Oct. 16.
The company announced last week it is raising prices for some of its subscription plans. Its $10 per month high-definition plan now costs $11 per month. Netflix’s 4K streaming plan, which enables higher resolution video streaming, will cost $14 per month, up from $12 per month.
Terry raised his forecast for Netflix stock to $235 from $200, representing 20 percent upside from Thursday’s close. It is also now the most bullish forecast for the company out of 37 analysts on Wall Street, according to FactSet.
The analyst predicts Netflix will add 13.9 million net subscribers during the second half of 2017 versus the Wall Street consensus of 10.8 million net subscribers. He also estimates the company will reach 130 million international subscribers by 2020 from 52 million at the end of the second-quarter.
“While high expectations, particularly in light of the price increase, could lead to volatility post [earnings] results, we believe upward revisions to consensus estimates will ultimately drive further outperformance,” he wrote.
In similar fashion, JPMorgan also reiterated its overweight rating and raised its price target for Netflix shares to $225 from $210 on Friday.
Netflix shares have rallied 58 percent this year through Thursday, compared with the market’s 14 percent gain. Its shares are up 1 percent in Friday’s premarket session.
— CNBC’s Michael Bloom contributed to this story.
Netflix gets its most bullish Wall Street call yet from Goldman Sachs