Shares of Netflix, Inc. NFLX peaked just shy of the $425 level earlier this summer and with shares trading lower by nearly $75, investors may want to take advantage of the sell-off.
The Analyst
SunTrust Robinson Humphrey's Matthew Thornton upgraded Netflix from Hold to Buy but with a price target lowered from $415 to $410.
The Thesis
SunTrust's proprietary "Subscriber Tracker" gives insight into Netflix's subscriber trends based on Internet search trends and recent findings bodes well for the streaming video company, Thornton said in a note. Specifically, data through July suggests domestic subscriber additions of a little more than 0.7 million and 5.0 international subscription adds. This compares favorably to consensus estimates of a little under 0.7 million on the domestic front and 4.5 million internationally.
Other encouraging developments that justify a bullish stance on the stock:
- Search data in India shows original content is resonating well with subscribers.
- Recent price increases in Japan aren't seen as a negative.
- Reports of Netflix moving away from billing through mobile app stores to avoid commissions could save 200 basis points in operating margin.
Price Action
Shares of Netflix were trading higher by 5 percent to $355.93 at time of publication.
Related Links:
Wall Street's Reaction To Netflix's Q2 Earnings Report
William Blair Predicts Netflix Shares Will Hit $660 By 2024
Photo courtesy of Netflix.
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