12:34 PM EDT, 03/27/2024 (MT Newswires) -- Netflix's ( NFLX ) advertising subscription tier is gaining momentum and could lead to a significant revenue opportunity while reducing churn, Wedbush Securities said Wednesday while increasing its 12-month price target on the stock by more than $100.

The brokerage removed the movie streamer from its best ideas list after a year of strong growth but upped its price target to $725 from $615 and reiterated an outperform rating. The new target reflects a multiple of 36 times Wedbush's 2025 earnings per share estimate, up from 30 times previously.

"We think Netflix ( NFLX ) can meet expectations for EPS to more than double between 2023 and 2026, supporting its premium valuation," analysts including Alicia Reese and Michael Pachter wrote in the note.

One catalyst is the advertising potential of WWE, with the wrestling brand owned by TKO Group (TKO) bringing its flagship weekly program to the platform in January 2025.

Subscribers to Netflix's ( NFLX ) ad-supported tier are expanding despite a seasonal deceleration in sign-ups, a quarterly Wedbush survey showed. Overall subscriber growth is likely up year over year and in line with guidance, it said. The ad tier is limiting churn and has a "significant opportunity" to expand Netflix's ( NFLX ) advertising revenue in 2024 and beyond, Reese and Pachter wrote.

"As long as global trends remain consistent and the ad market continues to improve this year, we expect Netflix ( NFLX ) to continue to report strong results," the analysts said.

Some of the major catalysts driving the placement on its best ideas list have been priced in, according to Wedbush. However, Netflix ( NFLX ) continues to benefit from the password-sharing crackdown and the introduction of the ad tier. At least 13% of former account sharers opted to pay more for the extra member feature, resulting in higher average revenue per user.

Another 10% kicked off extra members, who then went on to sign up for their own account or will in the coming quarters, Reese and Pachter said.

Price: 617.08, Change: -12.16, Percent Change: -1.93