Monday, September 20, 2010

Analysts Starting to Get Silly - Somewhere Henry Blodget is Smiling

The analysts are starting to get into a panic themselves... now you see multiple upgrades of stocks that are up 20, 30, 40% in just a few weeks.  I am reminded of Henry Blodget in a previous life.  Netflix (NFLX) has had its 2nd upgrade in as many days - where were these guys 40% ago?  This guy is upgrading the price even as he brings down the EPS... that is true 1999 behavior.

  • Jefferies analyst Youssef Squali this morning repeated his Buy rating on Netflix (NFLX), while boosting his target on the stock to $175, from $128. Nonetheless, he trimmed his 2011 EPS forecast to $3.80, from $4.65, although he remains above the Street consensus at $3.73. The lower estimate reflects higher content costs, and higher postage fees, as well as lower DVD usage and slightly lower ARPU and subscriber growth.  Nonetheless, he likes the stock now more than ever.
Hmmm... new price target $175, divided by lower EPS (forward!) of $3.80.... mmmm... yeh.  Translation: I am no longer able to justify my price target on any rationale valuation basis... hence let me talk about eyeballs.  Wait, that was 1999... well I don't really have a great reason, therefore I am going to bring out my 5 year discounted cash flow basis because clearly I can game 2014 with my crystal ball!

  • Squali says that his new price target reflects his five-year discounted cash flow model.
Give me some words, instead of numbers:
  • “We continue to find NFLX attractive as we believe that the company is best positioned to benefit from the industry’s transition to streaming from DVD usage,” he writes. “A growing digital content library and attractive pricing are likely to keep subscriber growth robust for several more years, in our view.”
And any of that reasoning above is new versus 5 weeks ago or $40 lower?

------------------------- (PCLN) with no additional news in the past month now gets an upgrade in the $330s... whereas it sat in the $280s post earnings spike 3-4 weeks ago.  Where was the upgrade then?  Now, after a $50 point run it's time to herd people in?  Sure why not...

  • Priceline (PCLN) shares are getting a lift this morning from Citigroup analyst Mark Mahaney, who repeated his Buy rating on the stock, while lifting his price target to $425, from $325.  “Despite a 53% year-to-date price surge, we continue to view PCLN as one of the most attractive large cap Internet stocks and the best play off the secular growth in online travel,” he writes in a research note.

So I assume you raised EPS targets since you just tacked on $100 smackers on the price target? 
  • The Citi analyst maintains his EPS estimates of $12.06 for this year, $14.92 for 2011 and $17.14 for 2012.

Err... no worries.  May the Shatner be with you.

Long, Netflix in fund; no personal position

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