In a research note to clients published Monday, JP Morgan (JPM) analyst Doug Anmuth advised investors to Buy Netflix (NFLX) due to Comcast (CMCSA) related weakness.
Anmuth noted that while he expects Netflix shares to be pressured near-term by worries about higher costs due to a private IP-interconnection agreement with Comcast, he believes that a more direct connection may aid in the Netflix user experience. Netflix expects to have a total of 34.3 million streaming customers in the U.S. by the close of Q1’14.
Ammuth reiterated an ‘Overweight’ rating on NFLX with a $500 price target, noting that there are several positives in the multi-year deal, including : [via Barron’s Tiernan Ray] “[A] more direct connection should be positive for the Netflix user experience across Comcast’s current footprint of nearly 54M homes passed and ~21M broadband subscribers—and managed subscriber total of ~30M with the Time Warner Cable merger,” and given that “Netflix and Comcast were in interconnect discussions for many months and we believe Netflix likely anticipated some degree of higher costs related to network agreements in its 2014 guidance and target for 400 basis points of Y/Y margin expansion in the Domestic Streaming business.”
Shares of Netflix are currently up $14.02, or 3.24% at $446.50.
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