Netflix's recent slowdown in domestic growth in an increasingly competitive field, however, has caused many investors to question the company's valuation.
Stifel's Take
Stifel's Scott Devitt reiterated Netflix's Buy rating and $143.00 price target, despite the company's slowing growth in and competitive pressures.
"We think fears on both fronts are overblown; Netflix's robust slate of originals has solidified its leadership in streaming video and a deceleration in cash spend this year suggests Netflix may see meaningful content leverage in 2017–2018," stated Devitt.
Increasing Competition? Not Fast Enough
Devitt argued fears of increasing competition were overblown, believing Netflix was on a more strategic track than competitors such as Amazon.com, Inc. AMZN and Hulu with room in the industry for multiple companies to prosper. "Although Amazon and Hulu have stepped up their investments in original content recently, Netflix is on pace to release several times more original programming hours than either service this year," Devitt added.
Additionally, in the long term, Devitt believes there will be multiple winners in streaming video including a high level of overlap between the entertainment services.
Increasing Reliance On Original Content
Devitt sees Netflix as a company that could significantly decrease its reliance on third party content while focusing more on original works. "Netflix may also become less dependent on 3rd party content as its portfolio of originals deepens, which could lead to upside to out-year consensus profitability forecasts," stated the analyst.
At time of writing, Netflix traded at $87.41, up 2.44 percent Tuesday.
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