Goldman Sachs Upgrades Netflix, Sees 50% Stock Upside Potential
"Netflix shares overreacted to more visible signs of competition, while at the same time, sub momentum has been better than expected," analyst Ingrid Chung says.
NEW YORK - Enough of the bearish talk about Netflix, Goldman Sachs said Tuesday in upgrading the stock to a "buy" rating and predicting 50 percent price upside.
Goldman Sachs analyst Ingrid Chung boosted her financial expectations for the company and argued that a sharp recent selloff in Netflix shares has been overdone.
The selloff in recent weeks - about 15 to 20 percent depending on what dates one uses - has come amid possible signs of emerging competition in the streaming or broader online video space from the likes of Amazon.com and maybe even from Facebook - a possibility on which Chung also recently commented.
Citing the "rapid growth of online video consumption" and the expectation that there is "enough demand for multiple players," Chung raised her rating on Netflix shares from "neutral" to "buy" and boosted her price target from $210 to $300. That would mean upside of nearly 50 percent from Monday's closing price of $201.20.
The bullish note helped boost Netflix shares 7.9 percent to $217.11 on a day that saw a broad market decline.
Wall Street has in recent weeks discussed what potential new entrants to the streaming video space could mean for Netflix, led by CEO Reed Hastings.
"We believe that Netflix shares overreacted to more visible signs of competition, while at the same time, sub momentum has been better than expected, Canada is near 10 percent penetration in six months, and our proprietary survey shows explosive growth for online video," Chung said.
She also argued that "Netflix now has sufficient scale to make it difficult for new entrants given low price points and expensive content cost."