Netflix stock finished higher on Tuesday after analysts at Evercore ISI said they have upgraded it to Hold from Sell. They also boosted their price target from $101 to $111 per share based on an improved outlook for subscribers. Shares of Netflix stock rose 4.54% to close out regular trading at $124.57.

Netflix Stock

Netflix stock upgraded by a major bear

Analyst Ken Sena and team said in a research note dated Dec. 6 that so far, his concerns about competition have not played out. He reminded investors that he downgraded Netflix stock in March 2015 because of concerns about competition from “more scaled audience platform focusing on video” and the growing number of over-the-top options from incumbent players in the video industry that own more content than Netflix.

More specifically, he was concerned that all that competition would force Netflix into spending so much money on content that it would undermine its valuation even more. Thus far though, this hasn’t happened because most of the competition has failed to gain much traction. Sena said that it has proven to be more difficult for streaming video and over-the-top video offerings to gain scale, as there is only a handful that has surpassed a million subscribers. Netflix, however, is effectively trouncing them all as it has 48 million domestic subscribers.

Additionally, the analyst believes that video ad efficiency improvements appear to be working in Netflix’s favor, interestingly enough. He said one reason is because scaled audience platforms are competing at the network level based on ad efficiency, which could make the licensing fees Netflix is willing to pay look more attractive. Additionally, he feels that content distributors seem more and more willing to make Netflix even more central to their core on-demand offerings. One example of this is the company’s partnership with Comcast to include Netflix on its X1 set-top box.

Why is Netflix stock not a Buy?

Sena is also increasing his estimates for Netflix because he believes that more on-demand integration with major distributors should mean a further reduction in churn rate. Also he sees next year as offering relatively easier comparisons compared to this year’s un-grandfathering efforts. Because of these factors, he boosted his 2017 domestic subscriber estimate to 52.9 million, a 1.1 million increase. He’s raising his international subscriber outlook by 900,000 to 55.6 million. He also re-examined the company’s addressable market in terms of affordability, especially in international markets.

The Evercore ISI team stops up short of recommending Netflix stock as a Buy, however, as free cash flow could still be a concern. They point to the company’s commentary about the recent free cash flow losses as representing a “high watermark.” They’re projecting free cash flow of -$1.5 billion for this year and -$1 billion for next year, which is about twice the losses they were expecting when they downgraded Netflix stock.

Additionally, they note that the company gets most of its revenue in the form of ad-free subscriptions, which means that continuing improvements in efficiency for video ads, along with voice interface, could mean that Google, Amazon or Apple become a very big threat for the company because they could be a stronger partner than Netflix for over-the-top content distributors.