Netflix, Inc. (NFLX): Are Investors Becoming Too Bullish?

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Netflix, Inc. (NASDAQ:NFLX) skyrocketed after another positive earnings report after closing bell on Monday, and it shows no sign of slowing down. As of this writing, the stock was up 25 percent since opening bell. However, some analysts are starting to question whether Netflix shares are worth as much as investors are paying for them. Others are simply taking a wait-and-see approach.

Netflix, Inc. (NFLX): Are Investors Becoming Too Bullish?

Bank of America Merrill Lynch and Credit Suisse issued reports to investors this morning, as shares of Netflix, Inc. (NASDAQ:NFLX) continued to climb. BAML analysts maintained their underperform rating, while Credit Suisse analysts maintained their neutral rating on the stock.

Analysts at BAML caution that investors may be holding an overly bullish view on the company in the wake of its recent earnings report. The analysts predict that while the company’s momentum will probably continue to push the stock higher in the near-term, they’re “skeptical of the bulls’ long-term optimistic valuation.”

They said they’re especially concerned about the bullish view because it’s likely that Netflix, Inc. (NASDAQ:NFLX)’s domestic streaming division will top out around 38 million subscribers by 2015. They also expressed concern about “limited management interest” in increasing prices and also the drag international expansion will keep putting on the company.

BAML analysts said they find it difficult to justify Netflix, Inc. (NASDAQ:NFLX)’s stock price at this time because even when using bullish arguments, they reach a price of $211, compared to the current price of $218 per share. The bullish arguments they used to determine that stock price were for Netflix, Inc. (NASDAQ:NFLX) to reach 45 million domestic and 45 million international subscribers, increase domestic prices by $2 per month and post a 43 percent contributions profit margin. They believe these arguments are possible but unlikely and overly bullish. Nonetheless, they raised their price objective for the stock to $115 per share.

Analysts at Credit Suisse are less wary than those at BAML, but they aren’t going all-in on the stock either. They significantly raised their price target from $132 to $204 per share. They say although the company’s March quarter resulted in better-than-expected subscriber additions, it also shows that Netflix’s content spending continued to moderate.

The analysts said they built a decreased growth trajectory in light of the company’s overall cost of acquiring content over the next five years. In their estimates, Netflix, Inc. (NASDAQ:NFLX)’s annual content acquisition costs could add about $450 to $500 million to its budget, compared to their previous estimates of $600 to $700 million.

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