Netflix, Inc. (NASDAQ:NFLX) stock is in the red again despite yet another price target increase and strong commentary from CEO Reed Hastings. Clearly, the bulls continue to outweigh the bears, at least as far as analysts are concerned, but the question now is whether investors have finally seen the light after pushing Netflix stock up by some 60% year to date.
In a note to investors today, GBH Insights analyst Daniel Ives said he raised his price target for Netflix stock from $310 to $375 per share and maintained his Highly Attractive rating. He sees plenty of levers the company can pull as it pushes deeper into all of its markets. Even though competition for original content is heating up and he remains concerned about Disney and Fox, he still feels that Netflix is in a good position to growth both its content and distribution in the next year to 18 months.
Netflix one its first Oscar this year, and he feels this demonstrates that the company’s credibility as a content producer in Hollywood is improving. In fact, he’s been hearing that “A+ talent” is considering roles in original content for Netflix. The company already said it plans to spend up to $8 billion on content this year, of which about one-third will be spent on original content.
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Ives estimates that the average Netflix viewer watches more than 10 hours every week, which is almost double the amount of time viewers of Amazon and Hulu spend watching their services. He also expects Netflix to enjoy about $10 per share in earnings by 2022.
While it’s been a rough couple of days for Netflix stock, some would say that the correction that’s been coming for a long time has finally arrived. Stifel analysts downgraded the stock earlier this week, citing the nosebleed valuation. The Street points out that Netflix stock was trading at a price-to-earnings multiple of 241 times, describing the disparity between it and General Electric’s valuation as “laughable.” GE is trading at a P/E ratio of only 13.9 times. Netflix stock is blowing the rest of the FAANG group out of the water, as Amazon is the only other one in the double-digit percentages for gains.
Although Netflix management doesn’t give thorough guidance for the full year, CEO Reed Hastings told USA Today that they expect to rake in about $15 billion in revenue this year, compared to the more than $11 billion the company received last year. He made the comment during a tour of Netflix’s production studios. He said they’re spending about $8 billion on production now.
Reporters also asked Hastings about the deal they struck with producer Ryan Murphy of Glee fame, which sources told The New York Times was worth $300 million. There’s been debate about whether Netflix overpaid to poach him from Twenty-First Century Fox, and Hastings said they always worry about whether they are overpaying. He also said that striking the deal with Murphy was a major step for them, but “it has good odds for success.”
Netflix stock tumbled by more than 1% in intraday trading on Thursday, falling as low as $314.13 per share.