The correction in Netflix, Inc. (NASDAQ:NFLX) stock came to a very swift end, as it was off to the races again early on Friday following the report that former President Barack Obama and his wife Michelle may produce original content for the streaming company. Most analysts remain bullish, and as expected, most are revising their price targets for Netflix stock higher since it has risen so high so fast this year, putting many price targets underwater. At least two more firms boosted their price targets for Netflix stock on Friday.
Netflix originals have been turning heads for years thanks to hits such as House of Cards and Orange is the New Black, but since the company won its first Oscar, things have really started to heat up. We heard last night that the streaming firm was close to a “production” deal with the Obamas. Sources familiar with the negotiations reportedly told The New York Times that the Obamas and the streaming company were in the late stages of talks about a series of shows in various formats. Later, unnamed sources confirmed the report of a deal between the Obamas and Netflix to CNN, describing it as a “production partnership.”
According to the NYT, some of the possible Netflix originals featuring the Obamas were reported to be a show moderated by Barack Obama on issues from his time in the White House and a show on nutrition or other topics Michelle Obama focused on while her husband was in office. The newspaper also said that the Obamas may also “lend their brand and their endorsement” to Netflix originals that “align with their beliefs and values.”
GBH Insights analyst Daniel Ives described the possibility of a deal with Barack and Michelle Obama as a “home run,” noting that the former president is one of the world’s most influential people. He sees the potential deal as further confirmation that Netflix originals are gaining “credibility” in Hollywood as top talent considers working with the company.
Bernstein analyst Todd Juenger also published a report on Netflix originals on Friday, although his focus wasn’t on the Obama news. He boosted his price target for Netflix stock to $340 per share and offered up “proof points” suggesting that the streaming firm will spend invest wisely in its originals. He feels that subscribers are “pre-disposed to think they will ‘like'” Netflix originals before they even watch them, and it ends up becoming a “self-fulfilling prophecy.”
He also noted that the show Dark has proven that a German production can also be a success in the U.S. and disproves the bearish concern that local content is a negative for the company’s future earnings power. Additionally, he pointed to Icarus, the first Oscar-winning Netflix original, as proof that the company can create content “with critical appeal.” Like Ives, he noted that top talent is starting to be attracted to the company’s shows, citing the Oscar win as a head-turner for A-listers.
Piper Jaffray analyst Michael Olson also raised his price target for Netflix stock on Friday, upping it from $319 to $360 per share, although he chose to focus more on the hard numbers. His analysis of Google Search trends for Netflix suggests that the streaming firm could beat expectations for subscriber adds in Q1.
His analysis suggests a 13.4% increase in domestic subscribers, while the consensus is looking for only a 10.1% increase. He estimates international subscriber growth at 52%, versus the consensus of a 40.1% year-over-year increase. Although he doesn’t expect Netflix to actually grow its user bases by such high percentages, he does note that these are positive trends, adding that the average error for domestic subscriber growth is 4%, while the average error for international growth is 11%.
Netflix stock surged more than 2% in early trading on Friday, climbing to yet another record high of $325.98 per share. Clearly, the bulls are back in control of Netflix stock following the downgrade from Stifel earlier this week.
