Netflix's Stock Hits All-Time High

7:14 AM PST 01/27/2011 by Georg Szalai
Bloomberg/Getty Images

Amid some upgrades, Wall Street discusses how much higher the stock can go or whether it has run up too much.

NEW YORK - Shares of Netflix, which were the best industry performer last year, hit all-time highs in Thursday trading after strong fourth-quarter results reported late Wednesday and some analyst upgrades.

The firm's results included the news that Netflix, led by CEO Reed Hastings, had by the end of 2010 crossed the 20 million subscriber mark, overtaking satellite TV operator DirecTV and satellite radio firm Sirius XM to become the second-largest subscription media business in the U.S.

In Thursday trading, Netflix shares hit a 52-week and all-time high of $211.79 before closing up 15.2 percent at $210.87, giving the company a market value of $11 billion, according to Bloomberg. The company has quadrupled in value over the past year. On Jan. 27 of 2010, it closed at $50.97.

Some analysts upgraded their rating on Netflix shares and/or raised their price targets on the stock on Thursday as Wall Street renewed its debate about how much higher the stock can possibly go or whether it has run up too much. According to Bloomberg, the stock's one-year return stands at 314 percent.

Pacific Crest Securities Andrew Hargreaves raised his rating on Netflix to “outperform” and slapped a whopping $270 price target on the stock, CNBC reported.

But others are more cautious, citing the firm’s already high market value, a contract renegotiation with Starz, whose streaming deal with Netflix ends in the middle of the first quarter of 2012, and the potential that cable operators will over time start charging consumers more for higher broadband usage, which would allow them to make some of the money back that they have been losing from declining video subscriber figures.

Goldman Sachs analyst Ingrid Chung boosted her target price on Netflix by $10 to $210 on Thursday and predicted that the company will approach 30 million subscribers by year-end to achieve “similar scale to HBO.” But she reiterated her “neutral” rating on the stock, which signals that there is no further upside for now. “We see competition increasing in 2011 and believe that broadband usage caps in the U.S. could slow sub growth,” she said.

Janney Capital Markets analyst Tony Wible similarly raised his fair value estimate for Netflix from $145 to $175, but also reiterated his “neutral” rating. In a report entitled “Momentum continues, but risks linger,” he said: “The company's biggest new obstacle will be the potential shift to usage based billing and the risk of an unfavorable Starz renewal (i.e. higher pricing or no renewal) that could set a new standard for pricing content.”

Wedbush Securities analyst Michael Pachter, who with his “underperform” rating suggests that investors sell the stock, raised his price target to $80 from $78, but remained bearish otherwise. “We expect streaming content costs to increase by at least $100 million in 2011,” he warned. “Netflix’s current share price suggests investor confidence that content costs will remain in check; we disagree, and see competition driving content costs higher.”
 

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