Netflix Stock Hits All-Time High, Nears $500

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Imperial Capital's David Miller downgrades the stock, estimating that "an incremental $184 per share of equity value has been created simply due to the advent of COVID-19."

Imperial Capital analyst David Miller has cut his rating on the stock of streaming giant Netflix from "outperform" to "neutral," while maintaining his price target of $489.

In a Monday report, he cited the stock's run-up this year. "Thus far, for 2020, Netflix's shares have risen 50.2 percent, versus the S&P 500, which is down 3.3 percent," the analyst highlighted. "In the last 18 months, shares of Netflix are up 81.6 percent, versus the S&P 500, which is up 26.1 percent." 

Netflix shares had closed last week at $476.89, "a mere 2.5 percent discount to our price target," Miller concluded. "We see no reason to increase the target price at this time."

In Monday trading, after the analyst's report was published, Netflix's stock hit an all-time high of $499.50. As of 11:25 a.m. ET, it was up more than 4.5 percent at $498.71, giving the company a market value of nearly $219 billion.

Miller cited four reasons for the outperformance. First, "this is one of a very few names in the S&P 500 which, for the most part, is impervious to any economic effects of COVID-19, as the price points for each service iteration are mostly recession-resistant and consumption of content is not communal," he said, estimating that "an incremental $184 per share of equity value has been created simply due to the advent of COVID-19," which allowed the stock to go this high faster than it would have done otherwise.

In addition, Netflix "has no exposure to any assets in the media sector under secular threat, such as cable networks, nor assets directly affected by COVID-19, such as theme parks or movie theaters," Miller highlighted.

Third, the analyst argued that the company "has largely debunked what we viewed as 'Street group-think' going into the launch of Disney+ in the fourth quarter of 2019, which was that Disney+ was going to 'take share' from Netflix and force Netflix to lower its prices."

Finally, Netflix shares have outperformed as the company has "efficiently differentiated itself from its arch rival Disney+ in that Disney+ is largely a myriad of American entertainment 'brands' exported globally, while Netflix is, for the most part, a smorgasbord of global shows from almost every country cross-pollinated all around the world," Miller wrote.