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Sell-Side Sour Grapes? Strong Quarter From Netflix Not Enough To Convince Some Analysts

Sell-Side Sour Grapes? Strong Quarter From Netflix Not Enough To Convince Some Analysts|NASDAQ:NFLX

Netflix, Inc. NFLX 1.67% turned in strong third-quarter box office numbers, pleasing investors who flocked to its stock and drove it up by close to 20 percent. Is the sentiment toward the stock turning from the outright pessimism that was evident in the immediate aftermath of the second-quarter results?

Sell-side analysts, though acknowledging that it was a standout quarter with subscriber numbers beat their numbers fair and square, aren't going overboard.

Deutsche Bank At Sell

Despite investors lapping up shares of Netflix, Deutsche Bank said it remains at Sell on the shares of the company. However, the firm is positive on Netflix's business model, although it is of the view that medium to long-term expectations for profit growth are too high.

Citing the 20 percent rally in the shares of the company in after hours in reaction to the results, the firm reiterated its Sell rating. The firm premised the rally on the lowered bar, which the company scaled in the third quarter. As such, the firm raised its price target to $92 on the higher estimates.

Baird Held Back By Long-Term Concerns

Baird sees growing competition and content costs as long-term concerns, although it believes upcoming new content and easier comparisons in 2017 could drive further near-term momentum. The firm attributed the stellar third-quarter results to international upside, with net adds of 3.2 million international subscribers, ahead of the 1.2 million guidance. Domestic subscriber addition beat expectations by 70,000.

Baird also termed the fourth-quarter guidance of 3.75 million in net international subscriber addition and 1.45 million in U.S. net additions as strong. The firm revised its fourth quarter and 2017 estimates and it raised its price target to $120. However, the firm stays at Neutral on the company.

Jefferies Sees Moderation In Growth

Jefferies expects growth to moderate going forward given difficult comparisons against international launches in the fourth quarter of 2016 and the first quarter of 2017. The firm thinks its thesis will play out over time and accordingly, maintains its Underperform rating. However, it raised its price target to $80 from $76.

Netflix is Overvalued –Wedbush

Wedbush believes Netflix is overvalued, premised on the company's exorbitant spending for original and exclusive content, profitability eluding its international operations and fierce competition for both content and subscribers.

The firm also expressed unhappiness at the cash burn, which it terms as unacceptably high. Wedbush also believes the company's current stock price does not discount the potential for competitive threat from Amazon.com, Inc. AMZN 0.08% recently launched video-only subscription option.

Webush stays at Underperform on Netflix but raised its price target to $60 from $50.

At last check, Netflix shares were up 18.91 percent at $118.67.

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DateFirmActionFromTo
Oct 2016Credit SuisseMaintainsOutperform
Oct 2016SunTrust Robinson HumphreyMaintainsNeutral
Oct 2016Morgan StanleyMaintainsOverweight

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