Shares of Netflix (NASDAQ:NFLX) haven’t been too hot lately. Since reporting earnings in mid-July, NFLX is down nearly 12%. The reason? Supercharged and unrealistic growth expectations normalized after the company’s recent quarterly subscriber miss. Hype died down. Momentum was lost. And everyone’s eyes opened up to the real risks facing Netflix: valuation, competition, and saturation.
However, SunTrust Robinson analyst Matthew Thornton believes the negative sentiment clouding the stock provides an opportunity for investors to buy the dip. As such, Thornton joins the bull camp, upgrading NFLX from Hold to Buy, with a $410 price target, which represents a potential upside of 15% from where the stock is currently trading.
Thornton outlined three more reasons for his newly bullish stance on Netflix:
- Our Subscriber Tracker (through July) points to 3Q Domestic/Int’l subs tracking solidly in-line/ahead (note: NFLX hasn’t missed subs 2 quarters in a row since 2012 and recent price increases in Japan and app store billing tests may be suggestive of solid sub trends).
- We are encouraged in India where search data shows NFLX initial original series resonating quite well and interest in NFLX rising on an absolute basis and relative to competitors. We see potential catalysts around additional partnerships (particularly in India) and tactical price increases (recent increases in Japan).
- We continue to see opportunity (as we’ve written) around IP licensing for consumer products/services (still early) and content licensing (currently China only) and long-term optionality around pricing points (India), product placement, box office, and even password sharing (Blockchain).
Wall Street agrees with Thornton that this streaming giant is one to watch, as TipRanks analytics exhibit NFLX as a Buy. Out of 36 analysts polled in the last 3 months, 25 are bullish on Netflix stock while 9 remain sidelined, and 2 are bearish. With a return potential of 9%, the stock’s consensus target price stands at $389.39.
