Shares of Netflix (NASDAQ:NFLX) jumped more than nine points, or 2.70%, in early trading Thursday on the back of an analyst upgrade that highlighted the company’s dominant position in the streaming video market which is estimated to grow to $70 billion by 2021.
RBC Capital Markets’ Mark Mahaney raised his NFLX price target to $440 from $360, marking a roughly 30% upside from Wednesday’s closing price of $341.18 per share. The analyst also reiterated his ‘outperform’ rating for the stock, saying in a note to client that his firm views the video streaming giant “as one of the best derivatives off the strong growth in online video viewing and in Internet connected devices (tablets, smartphones, Internet TVs), with our proprietary survey data tracking significantly improved customer satisfaction levels.”
Mahaney pointed directly to the positive results from a recent RBC consumer survey of more than 1,500 U.S. consumers – which showed that 68% of Netflix subscribers are either “extremely” or “very satisfied” with the company’s service – as another reason to be upbeat about the streaming company. Furthermore, the analyst said that the findings showed sequentially rising penetration levels, “consistently strong customer satisfaction trends”, low level of churn, and improvement of content.
“We believe these results largely confirm Netflix’s strong value prop and competitive position,” Mahaney said, noting that he believes the Los Gatos, Calif.-based company “has achieved a level of sustainable scale, growth, and profitability that isn’t currently reflected in its stock price.”
Netflix Stock Price Action
Netflix shares, which have plunged nearly 20% since hitting a 52-week high of $432.21/June 21, putting the stock in correction territory, were trading higher by 1.35% at $344 & change at the time of publication Friday.
Even with recent losses, NFLX remains 98.5% higher year-over-year through Thursday versus the S&P 500’s 17.2% gain. The stock has been in a general continuation of a steep ascent since early 2017.
Of the 32 analysts who cover Netflix stock, 19 have ‘Strong Buy’ ratings, 2 have ‘Buy’ ratings, 9 have ‘Hold’ ratings, and 2 have ‘Sell’ ratings.
Ticker currently trades at 79x forward 12-month EPS estimates. Trailing-12 P/E prints above 157x.