Analysts weigh in on streaming titan Netflix, Inc. (NASDAQ:NFLX) and online shopping giant Amazon.com, Inc. (NASDAQ:AMZN). While Netflix shows potential growth ahead of 1Q16 user estimates, powered by international subscriber growth, Amazon’s Web Service business is a major factor for the stock’s performance moving forward.
UBS analyst Doug Mitchelson reiterated a Buy on shares of Netflix with a price target of $147 upon UBS’ Evidence Lab study that showed positive subscribers results.
Mitchelson believes that 1Q16 subscriber levels are in-line or slightly ahead of his estimates. The US and foreign markets are performing well, particularly France, Germany, and Brazil. 2Q16 continues to remain uncertain, however, as Netflix plans to increase its price by $2/month starting in May for about 37%, or 17 million, of its current subscriber base. UBS’s survey indicated that Netflix has strong pricing power and Mitchelson believes “incremental price increase churn will be low (3%-4% of the cohort over 2Q/3Q).” The analyst believes the bear case is unlikely and projects 540K net 2Q US additions to the subscriber base.
The analyst continues by stating how “subscriber dynamics are overshadowing progress for key long-term drivers of value” as Netflix continues to produce new content rapidly and extends its scale leadership, adding 6.1 million subscribers in the first quarter alone. Mitchelson concludes that UBS’s sensitivity analysis shows US subscriber concerns as overplayed and emphasizes that international growth is the key when considering 1Q net sub additions.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Doug Mitchelson has a yearly average return of 16% and a 76% success rate. Mitchelson is ranked #231 out of 3844 analysts.
According to analysts polled in the last 3 months, 19 are bullish on Netflix, 4 are bearish, and 12 remain sidelined.
Amazon’s Web Service (AWS) is the main focus of the Deutsche Bank’s equity report as analysts watch the service’s “margin downtick.” Lead analyst Ross Sandler reiterated a Buy rating for Amazon, with a price target of $800.
After conducting checks and analysis on AWS, Sandler summarized several positive highlights. First, he points out that AWS is not losing share to GCP (Google Cloud Platform). Second, pricing appears to be “benign” as AWS hasn’t responded to GCP’s recent cuts. Third, AWS is outgaining competition with evidence showing improved data management and security. Lastly, the software is updated twice per day, faster than the competition.
Sandler believes that AWS is a top factor in Amazon’s performance as evidenced by the stock’s recent rally after the GCP conference. Further, he expects the AWS summit series to instill further confidence in customers in the cloud space. Amazon’s recent buyback authorization “bodes well for continued support” and the purchases of company stock have showed a strong buy signal historically. Finally, Sandler believes the Echo product line will grasp the attention of investors as the product has helped Amazon “[move] meaningfully ahead of [its] peers.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ross Sandler has a yearly average return of 6% and a 58% success rate. Sandler is ranked #332 out of 3842 analysts.
According to analysts polled in the last 3 months, 32 are bullish on Amazon and 4 are cautious. The average 12-month price target between these 36 analysts is $750, marking a 26% potential upside from where shares last closed.