The good people at Pacific Crest are out very positive on Netflix (NASDAQ:NFLX) this morning. The firm is calling recent sell-off overdone as their research has uncovered something very interesting:
PACS’ Andy Hargreaves says Netflix is working with Facebook & may be in the first stages of launching a joint service.
Excerpts from the call:
Facebook integration could boost global subscriber growth. We believe Netflix is working with Facebook to tightly integrate Netflix into Facebook’s platform. This could help increase time spent in Facebook and drive incremental Netflix subscribers domestically and in new international markets.
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We believe that, on top of its existing momentum, the company is working with Facebook to launch deeper integration of Netflix into the Facebook platform. The first stages of these efforts are likely to launch within the next few months, and we believe they could drive incremental subscriber growth domestically while helping to accelerate Netflix’s international expansion.
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Deeper Facebook Integration Could Boost Global Subscriber Growth
Warner’s launch of $3 a-la-carte rentals of The Dark Knight on Facebook prompted increased concern about Facebook’s potential to compete with Netflix. We do not believe this is warranted. First, we believe The Dark Knight rentals were initiated by Warner, with little to no involvement by Facebook. Second, we believe Facebook is much more likely to be a beneficial partner than a competitive threat to Netflix. In the most recent quarterly letter, Netflix management mentioned efforts to increase integration with Facebook. We believe this includes direct work with Facebook to deeply integrate the key aspects of Netflix’s service into the Facebook platform. We believe this could drive incremental domestic Netflix subscribers and would likely allow Netflix to accelerate international expansion, while increasing time spent on the Facebook platform.
Risk/Reward Appears Positive; We Recommend Buying NFLX at Current Levels
Recent competitive entrants have not altered our subscriber growth outlook for Netflix. Consequently, we recommend buying NFLX and reiterate our $270 price target, which is based on our DCF model.
Notablecalls: It’s pretty clear the analysts at Pacific Crest know more than they are willing to share publicly.
NFLX is down 16% since the announcement of the Amazon Prime video service on Feb. 22 and Warner’s launch of $3 a-la-carte rentals of The Dark Knight on Facebook.
This PACS call should help to alleviate these concerns & add fresh optimism to the mix. Can I hear international expansion?
Another squeeze coming? Possibly! GMCR surely showed it’s possible.
Imagine what the stock would do if we got FB deal news intraday – 15-20pt upside in an INSTANT!
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