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Anthony DiClemente Shares 3 Reasons To Support Netflix's Bullish Case

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Anthony DiClemente Shares 3 Reasons To Support Netflix's Bullish Case

Anthony DiClemente, an internet analyst with Nomura, was a guest on CNBC's "Squawk Box" segment and offered three reasons why investors should buy Netflix, Inc. (NASDAQ: NFLX)'s stock.

First, Netflix doesn't have a legacy business that it needs to "protect" versus legacy media companies. This also gives Netflix the flexibility to have a "singular focus" of simply delivering content to subscribers.

Second, Netflix boasts 47 million subscribers in the United States and 83 million subscribers across the world. The company's massive scale allows it to better spread its content costs over its base than any of its competitors can.

Third, Netflix stands to benefit from the growing trend of consumers "shifting to internet video," and Netflix happens to be the market leader in the category. In fact, the analyst pointed out that on any given week, Netflix's content handily and consistently tops the list of top SVOD (streaming video on demand) programming.

Related Link: Netflix Subscriber Churn Could Make For Another Poorly Received Quarter

Moving on, CNBC's Andrew Ross Sorkin quoted a Wall Street Journal report which blasted Netflix and asked the analyst to offer his take. Sorkin read from the report that "Netflix now faces slower growth and more competition."

DiClemente suggested that Netflix could indeed see slower subscriber growth but not necessarily revenue growth.

Sorkin quoted the report, which stated Netflix is competing in an "environment of rising prices prompting higher-than-expected churn."

The analyst argued that rising prices could be a positive for Netflix since it drives higher revenue and allows the company to fund better content and make its service more appealing and increase its scale advantage.

Finally, Sorkin quoted the report that stated Netflix's stock is trading at a "rich valuation of over 100 times projected earnings."

DiClemente responded that this is a "very simple-minded way" of looking at Netflix's valuation, which are "factoring in the new investments that have yet to yield a revenue and margin return."

At last check, Netflix was down 1.26 percent at $100.19.

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Latest Ratings for NFLX

DateFirmActionFromTo
Oct 2019MaintainsOutperform
Oct 2019MaintainsOutperform
Oct 2019DowngradesOverweightUnderweight

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings

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