Investors should buy the post-earnings dip in Netflix as long-term growth story remains intact, Wall Street analysts say

• Netflix fell as much as 8% on Wednesday after the company's first-quarter earnings missed analyst estimates.
• But investors should buy the dip in the video-streaming giant as its long-term growth story remains intact, according to two Wall Street analysts.
• Netflix has a long runway "to increase its market share from linear TV and is in a strong position to continue price increases in 2021," Bank of America said.
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Wednesday's 8% decline in Netflix following its first-quarter earnings results represents a long-term buying opportunity for investors, according to Wall Street analyst notes from Stifel and Bank of America.

The video-streaming giant missed its first quarter earnings expectations and estimated that its second quarter results will see the slowest subscriber growth in its history. Netflix benefited from a pull-forward in demand during the COVID-19 pandemic, but with vaccines ramping up and economies reopening, that growth is set to decelerate.

But price increases, minimal churn rates, and financial engineering set Netflix up for further gains ahead, according to the notes.

Stifel upgraded Netflix to Buy from Hold following the results, and increased its price target to $560, representing potential upside of 11% from current levels.

Stifel expects a 3-to-9 month period of the company working through its difficult comparison numbers amid the 2020 pandemic, followed by a multi-year period in which the stock "can compound at a rate consistent with revenue growth of ~15% per year."

Meanwhile, a strong content lineup in the second half of 2021, combined with a $5 billion stock buyback and the company's committement to hit cash flow breakeven in 2021 should support the stock going forward, according to Stifel.

That content lineup includes new seasons of hit shows Sex Education, The Witcher, Money Heist, and You, as well as new original films including The Kissing Booth 3, Red Notice, and Don't Look Up.

Bank of America's view on Netflix is also bullish, with the company reiterating its "buy" rating and $680 price target, which represents potential upside of 35% from current levels.

"We continue to see a long runway for Netflix to increase its market share from linear TV and we believe that it is in a strong position to continue price increases in 2021," BofA said, adding that its value proposition to consumers in strengthening as it continues to grow despite a decline in new content combined with a recent price hike.

Bank of America and Stifel aren't alone in their bullish view on Netflix. The company currently has 25 "buy" ratings and 14 "hold" ratings among Wall Street analysts.