In a report published this morning, Pacific Crest reiterated an ‘Overweight’ rating and $130 price target on Netflix stock, rejecting the bear thesis which states that Netflix, Inc. (NFLX) will not be able to generate returns on its content spending. In the report, the firm writes that Netflix’s U.S. streaming business has been very profitable over the past three years, showing that its business generates increasing returns over time. Further, the firm notes that the international markets the company launched before 2015 have become profitable. Pacific Crest also said that it expects Netflix’s newest markets — earlier this year the co. expanded its service in every major market in the world, except China — to conform to this pattern. Netflix predicts that it will add 2.5 million subscribers in the current quarter, only 500,000 of whom will come from the U.S.
Shares of NFLX are lower by 0.05% to $94.07 in early morning trading on Wednesday. Netflix was the best-performing stock in the S&P 500 in 2015, with a return of 134 percent. In 2016 however, the name is down about 18% year to date, with most of that decline coming since the video streaming pioneer released its Q1 earnings report in mid-April.
Netflix is valued at $40.38 billion. The name, which currently trades at 324x FY2016 earnings estimates, and more than 90x FY2017 forecasts, has a median Street price target of $120 with a high target of $150.
Netflix Inc. is up 0.74% year-over-year, compared with a 1.20% loss in the S&P 500.