Amazon.com, Inc. (NASDAQ:AMZN) is under siege amid Walmart’s most recent uppercut to take over on the e-commerce leaderboard. Meanwhile, Netflix, Inc. (NASDAQ:NFLX) is set to impress next week with another strong quarterly performance with meaningful international prospects lining up for years to come. Between Amazon’s rising competition and even withstanding Netflix’s challenging comps after a stellar fourth-quarter, Cantor analysts continue to say odds are in favor of these two internet kings. Let’s explore:
Walmart Tries to Rock Amazon’s Boat
Cantor analyst Naved Khan weighs in on Amazon on the heels of Walmart’s latest arrow shot at Amazon in a battle for dominance over the e-commerce playing field. Yesterday, Walmart revealed in a blog post of its new plan launching April 19th to offer discounts to customers that opt for the “pick-up in store” choice when buying from the online store.
Though the analyst takes the news with a hint of caution, he nonetheless reiterates an Overweight rating on shares of AMZN with a $970 price target, which represents a just under 9% increase from where the stock is currently trading.
“We view the introduction of Pickup Discount as an offensive/defensive move by Walmart as the company looks to leverage its footprint of ~5,000 physical stores to help drive faster growth in online sales and compete more effectively vs. Amazon. The latest move under Marc Lore, CEO of Walmart eCommerce (and founder of Jet.com), follows a series of changes to shipping made earlier this year, including reduction in free-shipping minimum to $35 from $50, forcing Amazon to follow suit in mid-Feb. We see a number of potential benefits accruing to Walmart from the latest move, including increased website traffic (by advertising lower prices) as well as an increase in foot traffic to physical locations, which are likely to increase the competition for Amazon, in our view,” Khan 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, five-star analyst Naved Khan is ranked #142 out of 4,556 analysts. Khan has an 82% success rate and yields 20.7% in his annual returns. When recommending AMZN, Khan gains 21.4% in average profits on the stock.
TipRanks analytics demonstrate AMZN as a Strong Buy. Out of 30 analysts polled by TipRanks in the last 3 months, 29 are bullish on Amazon stock while 1 is bearish. With a return potential of 9%, the stock’s consensus target price stands at $976.11.
All Eyes on Netflix’s International Momentum
As Netflix prepares to release its first quarter results for the year next Monday, April 17th after the close, Cantor analyst Kip Paulson is looking for a “solid performance” that has him continuing to bet on the video streaming giant for the long game.
Therefore, the analyst reiterates an Overweight rating on NFLX with a price target of $160, which represents an 11% increase from where the shares last closed.
For the first quarter of 2017, the analyst is looking for revenue to rise 34.8% year-over-year to $2,639.5M, EBITA to reach $290.5M with an 11.0% margin, and GAAP EPS of $0.35, compared to FactSet consensus forecasts of $2,643.4M in revenue, $309.6M in EBITDA, and $0.37 in GAAP EPS.
Though the analyst acknowledges after a “record” fourth quarter performance with historically high net adds, the giant has “a tough act to follow,” he nonetheless still predicts no end in sight for robust subscription growth. For the quarter, the analyst forecasts 3.72M international net adds to 48.085M ending subs, marking a 39.2% year-over-year rise, and 1.56M domestic net adds to 50.991M ending subs, indicating an 8.6% year-over-year rise. This aligns NFLX’s team who set expectations for 3.7M international net adds and 1.5M domestic net adds.
Paulson notes, “Stand-up comedy in particular has ramped up significantly in recent months, including shows from Dave Chappelle, Jim Gaffigan, and Louis C.K. Importantly, this ramp-up in originals has a cumulative effect over time, which bodes well for 1Q17 and the rest of the year. Originals should continue to build given management’s target of 1,000+ hours of original content in 2017 vs. 600+ hours in 2016.”
Moving forward, “It’s all about international subs from here,” asserts the analyst, who believes that while domestic subscriber growth will circle single digits, potential for international growth is far more promising, adding, “And internet/broadband penetration should only rise over time.”
Ultimately, for Paulson, Netflix’s first quarterly performance of the year stand to keep investors rooting for the giant, “[…] reflecting what we view as the impressive and ongoing ramp-up in original content, continued momentum in international markets, and improved operating/contribution margins. We maintain our Overweight rating and $160 PT, reflecting our view of NFLX’s substantial growth opportunity and strong long-term outlook as internet TV overtakes linear TV in the years ahead.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Kip Paulson is ranked #1,495 out of 4,556 analysts. Paulson has an 88% success rate and realizes 16.4% in his yearly returns. When recommending NFLX, Paulson earns 0.0% in average profits on the stock.
TipRanks analytics show NFLX as a Buy. Based on 35 analysts polled by TipRanks in the last 3 months, 22 rate a Buy on Netflix stock, 12 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $155.71, marking a nearly 8% upside from where the stock is currently trading.