Top Analyst Likes Netflix, Inc. (NFLX) Chances for Upside in Q4

Piper Jaffray's Michael Olson forecasts Netflix stock has 14% return potential.

Top analyst Michael Olson at Piper Jaffray is out calling for strong chances Netflix, Inc. (NASDAQ:NFLX) scores subscriber upside in its fourth quarter. After Olson poured over analysis of search trends on Google for the video streaming giant, his “Netflix Navigator” gauged subscriber levels where all three months of the quarter imply high potential for upside.

With both domestic as well as international subscriber fronts boding well for fourth quarter upside, one of Wall Street’s top performing analysts is reiterating an Overweight rating on NFLX stock in his research report with a $240 price target, which implies a just under 14% upside from current levels.

For the fourth quarter, the analyst projects 9.3% year-over-year domestic subscriber growth with his search index denoting 16.7% growth. In terms of international gains, the analyst forecasts 38.7% year-over-year subscriber growth with his index pointing to 56.4% growth.

“While we would not directly apply these implied growth rates and it is important to take note of error in our model YTD, the index is directionally positive, showing a high likelihood of Q4 subscriber upside,” Olson writes.

“Historically, with all three months of data, our search index has had a 0.93-0.94 correlation (over 21 qtrs) for domestic and int’l. The average error (with all three months of data) over the past three quarters (2017 YTD) for domestic is 4%, while the average error for international is 11%. The table below outlines where the index stands for domestic and int’l with all three months of the quarter,” contends the analyst, who explains: “The index is likely overstating sub growth; that said, it is clearly positive from a directional perspective, even when including similar levels of error from recent quarters.”

Michael Olson has a very good TipRanks score with a 68% success rate and a high ranking of #71 out of 4,755 analysts. Olson realizes 19.7% in his annual returns. When recommending NFLX, Olson yields 20.9% in average profits on the stock.

TipRanks indicates a cautiously optimistic analyst consensus leaning towards the bulls on Netflix. Out of 31 analysts polled in the last 3 months, 22 rate a Buy on Netflix stock, 8 maintain a Hold, while 1 issues a Sell on the stock. With a return potential of nearly 6%, the stock’s consensus target price stands at $223.47.