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NEW YORK – Shares of Netflix rose in early Tuesday trading after Credit Suisse analyst John Blackledge upgraded the stock from “neutral” to “outperform” and boosted his price target by $100 to $280. He cited a lack of material fallout from Amazon.com’s foray into streaming content and international growth opportunities, among other factors.
As of 10:25am ET, Netflix shares traded at $220.27, up 3.5 percent. It has over the past year traded as low as $70.05 and as high as an all-time high of $247.55, which the stock hit last month. It has since pulled back a bit amid new competition in the streaming video space from the likes of Amazon, which is offering 5,000 older film and TV titles in a bundle with its Amazon Prime shipping service, and Facebook.
Among reasons for his upgrade in a report entitled “Don’t Stop Believing,” Blackledge mentioned a more attractive stock valuation at current prices and the fact that new competition is now better reflected in Netflix’s stock price. He also suggested that Amazon’s video service won’t have any material impact on the company and cited international expansion as a key growth opportunity for Netflix.
As far as Amazon goes, Credit Suisse surveyed 1,013 Amazon users. Less than one percent of the 400 Netflix subscribers among them said they would give up their Netflix service to instead use Amazon’s video offerings. Three quarters cited Netflix’s great price-value offer, and 61 percent said they enjoy the ability to get both streaming content and DVDs from the company.
In a companion report, Credit Suisse analyst Spencer Wang on Tuesday predicted that Amazon will be “measured toward content spending” in the streaming space. “Amazon will likely focus first on defining the key customer metrics for Prime Instant Videos, then assessing these metrics to determine if this initiative is worthwhile to more aggressively pursue,” he argued.
Meanwhile, Blackledge also touched on Warner Bros.’s recently announced test with Facebook to offer The Dark Knight for $3 for a two-day rental and viewing period. “At this stage, we do not view this as material competition to Netflix streaming service for two reasons,” said the analyst. “It is currently just a test with one movie, and the content will be rented on an a la carte basis, which has not proven to be an effective competitor to Netflix.”
In terms of Netflix’s international growth opportunities, Blackledge predicted that after a “promising” start in Canada, the firm would launch in one major market each year through 2016, which could boost its reach from an estimated 33 million subscribers in 2011 to 69 million in 2016.
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