Copyright Barchart
Los Gatos, California-based Netflix, Inc. (NFLX) is a leading global streaming entertainment company with a market cap of $465.4 billion. It offers a vast library of TV series, films, documentaries, and games across a wide range of genres and languages. Shares of this streaming company have considerably outpaced the broader market over the past 52 weeks. Netflix has soared 40.6% over this time frame, while the broader S&P 500 Index ($SPX) has gained 13.4%. Moreover, on a YTD basis, the stock is up 23.1%, compared to SPX’s 14.3% return. Zooming in further, Netflix has also outperformed the Communication Services Select Sector SPDR Fund’s (XLC) 17.8% uptick over the past 52 weeks and 16.1% rise on a YTD basis. Recently, on Oct 31, shares of Netflix surged 2.7% after the company announced a 10-for-1 stock split. The decision was made to make its shares more affordable and accessible for employees participating in the company’s stock option program, as well as for retail investors, as the stock price had climbed above $1,000. However, on Oct. 21, Netflix released its Q3 results, and its shares tumbled 10.1% on Oct. 22. The downtick came as the company’s performance fell short of expectations. Netflix posted revenue of $11.5 billion and EPS of $5.87, both missing analyst estimates. While the revenue shortfall was minor, earnings were 14.8% below projections. Management attributed the underwhelming profit figure to an ongoing dispute with Brazilian tax authorities. For the current fiscal year, ending in December, analysts expect Netflix’s EPS to grow 27.8% year over year to $25.34. The company’s earnings surprise history is mixed. It exceeded the consensus estimates in three of the last four quarters, while missing on another occasion. Among the 48 analysts covering the stock, the consensus rating is a "Moderate Buy,” which is based on 30 “Strong Buy,” three “Moderate Buy,” 14 "Hold,” and one "Strong Sell” rating. This configuration is more bullish than two months ago, with 28 analysts suggesting a “Strong Buy” rating. On Nov. 3, KGI Securities upgraded Netflix to "Outperform" with a $1,350 price target, indicating a 23% potential upside from the current levels. The mean price target of $1,342.76 represents a 22.4% premium from Netflix’s current price levels, while the Street-high price target of $1600 suggests an ambitious upside potential of 45.8%.
