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Netflix stock falls but analysts get even more bullish



Netflix Inc.'s earnings report could not fully satisfy investors, but it was good enough to prompt a bevy of bullish analyst calls, with even the most bearish on Wall Street boosting its price target

The streaming video giant reported late Thursday earnings and all-important net subscriber add-ons that handily beat expectations, while revenue came up a bit shy. With the stock

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     NFLX, -3.63%

Soaring 51

% in the weeks leading up to the results, investors' expectations were running high – it's no wonder the shares slumped 2.9% in the morning trade Friday. Do not miss : Netflix thinks 'Fortnite' is a bigger competitor than other streaming services

But an overwhelming majority of Wall Street analysts got a bit more bullish. Of the analysts interviewed by FactSet, no less than 15 raised their price target, while only two lowered them. That raised the average target to $ 402.88, which is about 17% above current levels, from an average of $ 391.31 just before the release of results.

Analyst Mark Mahaney at RBC Capital Markets boosted his price target to $ 480 from $ 450, quoting "strong" fourth-quarter results and expectations that revenue growth and margin expansion will "Netflix offers a truly compelling value proposition with global appeal," Mahaney wrote in a note to clients. "We believe that Netflix has achieved a level of sustainable scale, growth and profitability that is not reflected in its stock price."

Justin Patterson's Raymond James reiterated the "strong buy" rating he had on shares for at least the past three years, and lifted its target to $ 470 from $ 450, saying Netflix's global distribution advantage is becoming clearer.

He said the results confirmed many elements of his very bullish view, including ramping up the international business, that Netflix's global distribution is a material advantage, share gains in media and entertainment are increasing, and clear long-term profit vectors such as pricing and margins. Read more about Netflix's latest hike.

See related : Netflix's 'Bird Box' soars, opens eyes in Hollywood.

"With growth growth poised to accelerate, margin expansion in [the second half of 2019] and [free-cash-flow]

Even with Friday's pullback, the stock was still up 56% over the past 12 months, compared with a 1.8% decline in the Nasdaq Composite Index

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     COMP, + 1.00%

and the S & P 500 index's

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     SPX, + 1.18%

4.6%

Wedbush analyst Michael Pachter reiterated the underperform rating he had on stock since at least July 2016, as he tried to explain his most bearish view.

"We expect content spending to trigger substantial cash burn for many years; despite four Netflix price increases over the past five years, cash burn continues to grow, "Pachter wrote. International profit may remain elusive due to competition for content and [subscribers]and future content migration and price hikes could cause deceleration in subscriber growth. "

Also read : This may be an even bigger issue for Netflix's $ 2-a-month price hike [StillPachterraisedhispricetargetby10%to$165-thatwas52%belowcurrentlevels-from$150dueprimarilytoaless-bearishviewonNetflix'sinternationalbusinessHisper-sharevaluationofinternationalroseto$62from$45whilehisdomesticvaluationdroppedto$102from$104andhisdomesticDVDvaluationstayedat$1

Elsewhere, analyst Doug Anmuth at JPMorgan got a bit more bullish on Netflix, reiterating his overweight rating while raising his price target to $ 435 from $ 425, despite some concern that the latest price hike could lead to fewer subscriber additions in 2019 than last year. He said the price increase could have "less impact than expected," and recommended "buying any weakness in the shares."

"The underlying global secular shift towards on-demand entertainment remains strong, as does [Netflix’s] , "Anmuth wrote."

Michael Olson's Piper Jaffray has affirmed his overweight rating and boosted his price target to $ 440 from $ 430, but acknowledged that Netflix's fourth quarter results and "first quarter" outlook were "mixed," as domestic subscriber adds fell short of his expectations.

"The single most important metric to investors, however, is international subscriber additions and that was ahead of expectations for the quarter and the guide," Olson wrote. And with just 15% share of internet households outside of the US, with the exception of China, there is clearly room to grow international.


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