Via Barron's:
- Susquehanna Financial analyst Marianne Wolk this morning cut her rating onNetflix (NFLX) to Sell from Neutral, noting that the stock is now about 26% ahead of her valuation target, raised 20% seven weeks ago to $120. At 44x pro forma forward EPS, she notes that the stock is trading at its highest P/E in five years, at a 34% premium to peer Internet stocks.
- “Our downgrade is not a statement regarding the current quarterly outlook, but simply [a reflection of the fact] that the risk/reward has gotten out of balance,” she writes. “Our $120 target already reflects an extremely positive long-term outlook for Netflix in the digital video market.
- We assume Netflix will exceed 25 million subscribers by year-end 2011 and 30 million by year-end 2012, up sharply from 15 million in June and on part with major premium cable channels like Showtime. Moreover, we assume 75% of subscribers are digital by year-end 2011 and 95% by 2012…Finally, we assume NFLX successfully offsets rising streaming costs with lower DVD shipments and fees to to maintain adjusted EBITA margins near 15%. These forecasts assume near=perfect execution.”
- Adds Wolk: “After a spate of really good news, it is hard to imagine what is left in the way of potential positive catalysts.” In particular, she notes that while the company could be a good strategic for a number of companies, the high valuation makes an acquisition of the company unlikely.
Of course, true to form by the momo analysts - another one came out today and upgraded the stock saying (I paraphrase) "valuation is for the birds".
- Piper Jaffray maintained its overweight rating but raised the price target from $156 to $180.
According to unsubstantiated reports, NFLX Yahoo message board posters (in between board posts of "at least this analyst has a brain!") are pitching in for an all expense paid trip to Paris for "the nameless smart analyst at Piper Jaffray".
Technically, hey the stock is down $20 from yesterday's peak - might need to restart the position at this "cheap" valuation. ;)
Disclosure: I sold my NFLX yesterday morning at the open, so I can now mock the spectacle; no personal position but I shall be long soon enough and laud "smart analysts" who only upgrade
Technically, hey the stock is down $20 from yesterday's peak - might need to restart the position at this "cheap" valuation. ;)
Disclosure: I sold my NFLX yesterday morning at the open, so I can now mock the spectacle; no personal position but I shall be long soon enough and laud "smart analysts" who only upgrade