Piper Jaffray is out with an analyst note this morning where they reiterate their Overweight rating on shares of Netflix NFLX; they also raised their price target from $104.00 to $140.00.
Piper analysts reiterated their positive thesis based on two high-level transitions that are underway, which they believe are favorable for Netflix: “1) ongoing shift from retail stores to alternative rental models (including DVD-by-mail, digital streaming, and kiosk); and 2) the shift within Netflix's subscriber base from physical rentals (DVD-by-mail) to digital streaming (Watch Instantly) will improve Netflix's model over the next several years.”
The analysts said that their model is still a bit conservative, saying, “We are modeling for all key metrics (net sub add growth, GM, churn, SAC, ARPU) to deteriorate from CY10 to CY11. However, if Netflix sees continued success in the adoption of the Watch Instantly platform, many of the key metrics could improve in CY11.”
Piper closed by saying, “We reiterate our OW rating on NFLX. Our price target is now $140, based on 38x (was 31x) CY11E EPS; this multiple is in line with our EPS growth rate, which we believe is warranted given the continued improvement in key drivers for the company.”
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