Jefferies analysts had different takes regarding the future outlook of household name stocks, Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX). According to the analysts, Amazon is moving in the right direction in part to the improvements in their Prime Video platform, while Netflix is struggling with domestic growth. Let’s take a closer look.
Analyst Brian Pitz discussed the outlook of Amazon Prime Video after Amazon’s deal to gain exclusive streaming rights for the majority of PBS’s children shows. Amazon now has the rights to stream shows like Arthur and Odd Squad six months after they premiere on local PBS stations and PBS’s website.
Not all PBS shows will be available on Prime. Season Street, Super Why!, and Curious George will all remain on HBO, Netflix and Hulu respectively. Nonetheless, this deal gives Amazon the overwhelming edge in children shows over its competitors. Amazon Video now has 577 TV seasons that are rated TV-Y and TV-G, as well as 184 similar rated seasons on Amazon Prime. This is in comparison to the 368 season that Netflix hosts.
The analyst expects to see more content deals in the near team. These deals help strengthen Amazon Prime Video, which the analyst believes is a “helpful/approachable feeder program into the broader Amazon program.” Pitz believes that Prime Video, which costs $8.99/month, is a cheap standalone service to get people onto the Prime platform. Increasing Prime customers is a major focus for Amazon after studies show that Prime members spend double the amount of time on Amazon.com as non-prime members.
Following the announcement of the deal with PBS the analyst reiterated his Buy rating with a price target of $865, marking a 17% increase from current levels. Pitz has a very good TipRanks score with a 66% success rate and he stands at #38 out of 4,013 on the analyst leaderboard.
As of this writing, out of the 35 analysts who have rated the company in the past 3 months, 91% gave a Buy rating and 9% gave a Hold rating. The average 12-month price target for the stock is $819.97, marking a 11.17% upside from current levels.
Analyst John Janedis gave his opinion on Netflix as its competition continues to take away some of its market share. When Netflix came into the market it transformed an industry and took competitors, especially Blockbuster, by surprise. It built a massive base and content library, without having to worry about competition. The analyst now feels that the investment made by Hulu and Amazon will ensure a more competitive landscape for the next 5+ years.
This uptick in competition caused Janedis’ research to show, “the domestic subscriber growth trajectory may be somewhat flatter than the markets expectations.” The analyst believes that this growth trajectory is slowing down as US content owners become more selective in licensing their content to Netflix. He believes that media companies realize “the need to come to market with an integrated SVOD/OTT offering.”
While Janedis does acknowledge there is a high potential growth, he expects international growth to be more “challenging than expected in the near term.” He mentions limited content, a language barrier and an underdeveloped payment process and broadband infrastructure as potential impediments for international growth.
This increase in pressure from competitors made the analyst assume an Underperform rating with a price target of $80, marking a 15% loss from current levels. According to TipRanks, the analyst has a success rate of 53% with an average return of 7.6% per recommendation.
Out of the 29 analysts who have rated the company in the past 3 months, 59% gave a Buy rating, 31% gave a Hold rating and 10% gave a Sell rating. The average 12-month price target for the stock is $144.42, marking a 52.66% upside from current levels.