Market Overview

Goldman Sachs Raises Netflix Price Target To $490, Projects Positive Cash Flow By 2022

Share:
Goldman Sachs Raises Netflix Price Target To $490, Projects Positive Cash Flow By 2022
Related NFLX
Benzinga's Bulls & Bears Of The Week: Amazon, Caterpillar, Costco, Netflix, More
From Facebook To Netflix: The S&P's Big Sector Shakeup, Explained
Lessons From A Market Great: Randy McKay (Seeking Alpha)

One of Netflix, Inc. (NASDAQ: NFLX)'s biggest negatives is free cash flow, but it's a concern that will subside as the company exits 2018, according to Goldman Sachs.

The Analyst

Goldman Sachs' Heath Terry maintained a Buy rating on Netflix's stock with a price target lifted from $390 to $490.

The Thesis

Netflix's cash burn totaled $2.02 billion in 2017 and will likely worsen to $3.06 billion in 2018, TheStreet said in a story quoting Terry's research report. By 2019, Netflix's cash burn will improve to negative $2.12 billion and negative $1.45 billion in 2020, the analyst said. By 2022, Terry forecast for Netflix's cash flow to turn positive as the company's multiyear investment in content  generates $500 million positive cash flow at that time.

Encouragingly, Netflix's revenue growth is now outpacing its content spend, according to TheStreet. This is a critical element to the bullish thesis for the stock, as the company needs to reduce its reliance on external content while showing investors it will be cash flow positive.

"While the widening gap between Netflix's growing income statement profits and the increasing cash flow statement deficit has seemingly had little impact on the company's valuation, we do believe that as the gap begins to reverse and Netflix's cash flow inflects positively in the coming years, NFLX shares should benefit," Terry was quoted as saying by TheStreet. 

Price Action

Netflix shares hit a new all-time high of $384.24 Wednesday and were up 4.32 percent at the time of publication. 

Related Links:

Wall Street Analysts Reflect On AT&T-Time Warner Ruling, Assess Implications Outside Tech, Media

Net Neutrality Repeal Is Official: Will You Notice?

Photo courtesy of Netflix. 

Latest Ratings for NFLX

DateFirmActionFromTo
Sep 2018RBC CapitalMaintainsOutperformOutperform
Aug 2018SunTrust Robinson HumphreyUpgradesHoldBuy
Jul 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings

Posted-In: Goldman Sachs Heath TerryAnalyst Color Price Target Reiteration Top Stories Analyst Ratings Media Best of Benzinga

 

Related Articles (NFLX)

View Comments and Join the Discussion!

This Day In Market History: NYSE Launches After-Hours Trading

Buy, Sell Or HODL? This Bull Thinks 'Bitcoin Is Just Getting Warmed Up'