Citi's May Says Buy The Dip In Netflix

With Netflix, Inc. NFLX down more than 15 percent over the past three months, investors may want to consider buying the dip, according to Citi. 

The Analyst

Citi's Mark May upgraded Netflix from Neutral to Buy with an unchanged $375 price target.

The Thesis

Citi's prior Neutral rating on Netflix's stock was partly based on valuation, but the recent weakness in the overall market has brought shares of Netflix down to reasonable levels, May said in the upgrade note. (See his track record here.) 

The streaming video provider boasts an attractive recurring subscription-based revenue model that offers "significant value" to consumers and is backed by a competent management team with a reputation of solid execution, the analyst said. 

Netflix has strong fundamentals that should support continued expansion, especially in the international segment, where it can exert pricing power, May said. The company's free cash flow burn is likely to ease exiting 2018 and should turn positive in 2020 or 2021, he said. 

Bottom line: the recent market sell-off gives investors a good opportunity to buy a "high-quality franchise" and earn an attractive return over time, according to Citi. 

Price Action

Netflix shares were trading up 4.82 percent to $336.58 at the time of publication Friday. 

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