Wall Street’s best-performing analysts are commenting on two stocks that are soaring today: Netflix, Inc. (NASDAQ:NFLX) and CSX Corporation (NASDAQ:CSX). However, whereas RBC Capital approaches Netflix from a bullish perspective, Oppenheimer has not been swayed from the sidelines in regards to CSX’s prospects.
Let’s take a closer look:
Netflix is Still RBC Capital’s #1 Pick
Netflix shares are on an 8% surge after reporting stellar fourth-quarter EPS results yesterday after market close, exciting investors with a strong beat on both subscriptions as well as profits.
Considering the solid earnings performance, top analyst Mark Mahaney at RBC Capital praises the giant as his “#1 pick” and reiterates an Outperform rating on shares of NFLX while raising the price target from $150 to $175, which represents a just under 23% increase from where the stock is currently trading.
In reaction, the analyst lifts his revenue estimate for 2017 up 2% to $11.3 billion as well as his GAAP EPS forecast up 45% to $1.02.
For the fourth quarter, the video streaming giant brought in $2.48 billion in revenue, slightly topping the Street, along with GAAP EPS of $0.15 that “handily beat” both the Street’s as well as the analyst’s projection of $0.12.
Mahaney opines, “What drove the 8% after-market rally was the Triple Subs Beat – with Domestic Q4 Adds of 1.93M (vs. Street’s 1.44M), Intl Q4 Adds of 5.12M (wow vs. Street’s 3.74M) & Q1 Intl Adds Guidance of 3.70M (vs. Street’s 3.05M) – AND the Positive Profit Proof Points – record high U.S. Contribution Margin (38% in Q4 and 41% in Q1) and Intl Profitability…gasp! ($16MM gain in Q1).”
“Netflix is reaching critical mass with consumers in an increasing number of countries based on its User Experience, Content & Pricing. And although it faced elevated churn in mid-‘16 due to price increases, it did succeed with the price increase. The Key Domestic Evidence is accelerating Revenue Growth in Q4 (27%) and record-high Contribution Margin (38%). The Key International Evidence is Record High Sub Adds (5.1MM) and first-ever Contribution Profit ($16MM in Q1). Cash burn remains high – -$2B FCF in ’17 – but this should be the peak burn year,” asserts Mahaney.
Moreover, the analyst predicts operating margins will “consistently grind higher,” another win for Netflix. Looking ahead, the analyst is increasingly confident in the giant’s momentum, surmising $200+stock awaits investors in the next couple years.
Mark Mahaney has a very good TipRanks score with a 71% success rate and a high standing of #5 out of 4,355 analysts. Mahaney realizes 21.1% in his annual returns. When recommending NFLX, Mahaney yields 52.9% in average profits on the stock.
TipRanks analytics demonstrate NFLX as a Buy. Out of 33 analysts polled by TipRanks in the last 3 months, 20 are bullish on Netflix, 11 remain sidelined, and 2 are bearish on the stock.
Who Might CSX’s New CEO Be?
CSX shares are soaring close to 16% after news came to light that CEO Hunter Harrison of Canadian Pacific (NYSE:CP) has announced early retirement. Yet, how does this come into play for CSX?
The rumor mill started buzzing, with trusty sources like the Dow Jones News Wire and the Wall Street Journal pointing to an executive position at CSX as Harrison’s next target. Harrison is allegedly working with an activist to seek out the new role with the railroad company.
Top analyst Scott Schneeberger at Oppenheimer remains sidelined nonetheless and reiterates a Perform rating on CSX without listing a price target.
Schneeberger highlights, “CSX reported a solid, albeit mixed 4Q16. Revenue was stronger than expected, while EPS was $0.01 below expectation (1x tax impact). The company’s 2017 guidance was consistent with expectation with efficiency savings of $150M+ vs. prior commentary of ~$150M (3Q16 call). CSX anticipates 2017 capex down $500M y/y to $2.2B (~19% of revenue), adding, “With the quarter/guidance relatively consistent with expectation, the more dynamic CSX news came post-close.” This news was Harrison’s premature retirement.
Though cautious on valuation of the stock, the analyst believes, “At this juncture, Mr. Harrison’s future endeavors are speculative, but his strong reputation boosted CSX shares […]”
Ultimately, “We’re maintaining our Perform rating, as CSX’s post close price represents 20.1x our 2017E adjusted EPS,” Schneeberger contends.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Scott Schneeberger has achieved a high ranking of #24 out of 4,355 analysts. Schneeberger upholds a 69% success rate and gains 13.0% in his yearly returns. When recommending CSX, Schneeberger earns 0.0% in average profits on the stock.
TipRanks analytics indicate CSX as a Buy. Based on 7 analysts polled by TipRanks in the last 3 months, 4 rate a Buy on CSX stock while 3 maintain a Hold. The 12-month average price target stands at $39.00, marking a nearly 6% upside from where the stock is currently trading.