Pacific Crest’s Andy Hargreaves today reiterates an Outperform rating on shares of Netflix (NFLX) and an $85 price target, writing that while there are many good things to be said about its business, he recommends buying on pullbacks, as “acquisition speculation has pushed the stock above current fundamental support.”
Netflix shares this morning are up $1.49, or 1.6%, at $92.22.
The company is still “the clear leader in subscription streaming” despite the fact that there’s a “stubborn” trend toward “turning Netflix on and off” among subscribers, and despite the fact that “DVD churn appears likely to remain high,” writes Hargreaves.
Hargreaves cites data from his firm’s “Consumer Tech Survey,” which showed that 32% of respondents who own a smartphone, and 40% of those who own a tablet computer subscribe to Netflix, which is higher than the average of 23% of all respondents who subscribe. That suggests to Hargreaves that there is “significant further subscriber growth opportunity” among “connected device” owners for Netflix.
Another favorable stat, in Hargreaves’s view is that “Netflix has higher share among Amazon.com (AMZN) Prime and HBO subscribers than the general public,” and appears in fact to be growing.
Hargreaves’s $85 target is based on a discounted cash flow model that assumes the company reaches 35 million domestic streaming subscribers by 2015.
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