Analysts are outlining bullish forecasts for both Facebook Inc (NASDAQ:FB) and Netflix, Inc. (NASDAQ:NFLX). One analyst did not anticipate FB’s new multi-billion dollar share repurchase program kicking off 2017, but commends the social media giant’s various growth vectors, whereas another analyst offers a positive initiation of Netflix, seeing 24% upside for the company he views as “unstoppable.” Let’s dive in:
Facebook: A Top Pick
On Friday evening, Facebook announced a $6 billion share repurchase program for Class A shares commencing the first quarter of 2017. In reaction, JMP analyst Ronald Josey reiterates an Outperform rating on shares of FB with a $165 price target, which represents just under a 37% increase from current levels.
Josey notes, “While we are somewhat surprised to see the company initiate a buyback program given the multiple growth vectors we see ahead (e.g., Video and Live, Instagram, WhatsApp, Messenger, Virtual Realty, Oculus, AI & ML), if the buyback is implemented we believe it would offset the increased share dilution from the past several major acquisitions. We note Facebook’s ~$22 billion acquisition of WhatsApp in 2014 was ~82% in stock and Oculus was 80% in stock.”
Moreover, the analyst adds, “Importantly, we do not view this authorization as precluding Facebook from its continued focus on growth.”
Ultimately, “Facebook remains our top pick given the multiple opportunities available, and we view this authorization— assuming it is launched / completed—as a move by management to take advantage of the current valuation,” Josey surmises, adding that the repurchase authorization could offset dilution from the social media giant’s prior acquisitions, easing selling pressure ahead of CEO Mark Zuckerberg’s intended $3 billion share sale.
According to TipRanks, which measures analysts’ and bloggers’ success rate, three-star analyst Ronald Josey is ranked #1,792 out of 4,227 analysts. Josey has a 51% success rate and realizes 1.2% in his annual returns. When recommending FB, Josey yields 21.3% in average profits on the stock.
TipRanks analytics demonstrate FB as a Strong Buy. Out of 38 analysts polled by TipRanks in the last 3 months, 35 are bullish on FB and 3 remain sidelined. With a return potential of 31%, the stock’s consensus target price stands at $158.12.
Netflix Boasts Strength in Content and Substantial Flexibility in Business
Brean Capital analyst Alan Gould initiates coverage on shares of Netflix with a Buy rating and a $145 price target, which implies an upside of almost 24% from current levels.
Gould asserts, “We believe NFLX has created an unstoppable lead in the internet TV business and is positioned to dominate the business long term. It is on a path to become the largest spender on entertainment content creating a content moat and amortizing it over a global direct-to-consumer audience making it the low cost producer.”
Overall, “International losses and investment in original content make the stock appear expensive on traditional metrics. But looking out 15 years, using the model of the domestic market and the first wave of international launches, we believe NFLX can attract 300 million global subscribers generating a $19 ARPU, 29% EBIT margin and over $25 of EPS,” Gould contends.
According to TipRanks, four-star analyst Alan Gould is ranked #537 out of 4,227 analysts. Gould has an 89% success rate and gains 9.3% in his yearly returns. However, when suggesting NFLX, Gould loses 39.0% in average profits on the stock.
TipRanks analytics indicate NFLX as a Buy. Based on 37 analysts polled by TipRanks in the last 3 months, 20 rate a Buy on NFLX, 11 maintain a Hold, while 6 issue a Sell. The 12-month average price target stands at $123.97, marking a 5% upside from where the stock is currently trading.