RBC's Mark Mahaney: 'Netflix's Valuation Is Still Reasonable, Staying On Sidelines On Twitter'

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In what could seen as a coincidence in terms of timing, Netflix, Inc. NFLX is making all-time highs on Wednesday, while Twitter Inc TWTR is trading very close to its 52-week lows.

RBC Capital Markets’ Mark Mahaney was on CNBC recently to share his outlook on these stocks trading at opposite ends.

Netflix

"I think they are going to split the stock," Mahaney began. "They have kind of signaled that and – more importantly on the stock call – we are staying with it. We have had a buy on this for quite some time. We do a lot of survey work on this name; we think customer satisfaction is rising. They have reached escape velocity in the U.S."

Related Link: Bob Peck On Netflix: Opportunity Is There, But Staying On The Sidelines

He continued, "There’s nobody out there that’s going to really take material market share from them, and now they are really ramping in the international markets.

"We think they are going to add more subs in the U.S. this year than last year, despite the price increase; that’s the definition of pricing power. You want to be long Netflix. It’s one of the most disruptive companies in the Internet space, and the valuation is still reasonable."

Twitter

On Twitter trading near its 52-week lows, Mahaney said, "We are on the sidelines on this one. In the low-30s, it looks like it's got some valuation support. It’s certainly bounced off that in the past from a trading perspective, but there’s two value propositions that are unproven now."

He explained, "Advertisers are starting to kind of cut back a little bit or not spend this aggressively on Twitter. The value proposition to advertisers has yet to be proven at scale. And then the consumer value proposition, surprisingly really has yet to be really be proven.

"We haven’t seen that reacceleration in user growth that the company promised, and they have done a lot of changes to the user interface," Mahaney concluded.

Image Credit: Public Domain
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Posted In: Analyst ColorCNBCMediaMark MahaneyRBC Capital Markets
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