Netflix's stock experiences a 16% increase following Wall Street's endorsement of ad-driven subscriber growth.

• Netflix stock surged Thursday following a promising quarterly earnings report.
• Netflix said its ad-based tier saw a 70% jump in subscribers.
• Netflix also beat overall subscriber estimates.

shares surged 16% Thursday following a promising quarterly earnings report.

The new ad-supported subscription tier experienced a 70% increase in subscriptions, resulting in several victories for the streaming giant.

Netflix experienced a significant increase in subscribers during the third quarter, with 8.76 million new members joining, exceeding analysts' expectations of 5.49 million. This represents the largest gain in subscribers since the second quarter of 2020, when Covid-19 restrictions led to a surge in sign-ups.

Netflix's Wednesday report signaled a resumption of growth, alleviating concerns about market saturation after the company experienced its first net subscriber loss in over a decade in April 2022. Several analysts expressed their enthusiasm about the positive news.

Morgan Stanley analysts upgraded the stock to overweight and increased its price target to $475.

According to Morgan Stanley's Thursday analyst note, it is believed that Netflix will achieve the objectives it set a year ago, increase revenue growth to double digits, and expand margins.

Matthew Thornton, a Truist analyst, stated in a Thursday note that the password-sharing crackdown could drive subscriber growth into the next year. Additionally, the firm upgraded Netflix to a buy rating and increased its price target from $430 to $465.

Thornton stated in a note that our thesis is based on the assumption that ongoing password sharing benefits, a long-term advertising ramp, and $10 billion in share buybacks will lead to the top 3 tent-poles by 2025 (Squid Game, Wednesday, Stranger Things), with video games being a free call option, and optional growth levers available to NFLX.