Netflix shareholders woke up to a pretty good morning — and they could have an even greater afternoon if they already cashed out. (Not financial advice.)
Netflix stock (NFLX) closed up $86.59 per share on Thursday — or 18.21 percent — at a massive $562.05 apiece. The stock previously closed at $475.46, following a somewhat down day. Much of that initial momentum came in the after-hours markets, which saw the stock soar after the streaming giant revealed its first quarter 2015 earnings. Thursday’s U.S. market hours certainly didn’t disappoint investors either.
That said, the stock may still be undervalued, according to analysts. Rich Greenfield of BTIG labeled Netflix as a “buy” rating up to a $600 price point way back on Oct. 14. Their upgraded expectations at the time predicted that we’ll see that figure by fall 2015.
Fellow analysts Sterne Agee are a little less bullish around this price point. The company labeled NFLX as a “neutral” stock choice as of last night’s close. They see fair value for company shares at $500.
“As ever, the market doesn’t really care about GAAP net income, unless the falls start to look very critical: In this case the fall was less than 6 percent, ‘just’ $29.4 million below the level from the same point a year ago,”Odeluga said. “What caught the eye in the statement was the jump in global subscribers to 4.9 million, 19.5 percent higher than market forecast, taking global streaming membership to 62.3 million.”
“For the market, these were all worth the net cost implied by the year-on-year profit fall,” he explained.
Michael Nathanson of MoffettNathanson concurred: “It’s all about long term subscriber targets,” he told TheWrap. “Every sub [forecast] beat supports a much larger ultimate revenue base.”
On Wednesday, Netflix hit its revenue mark, missed on earnings per share forecasts, and saw net income fall.
“Industry analysts generally forecast global total combined revenue from over-the-top streaming and video on demand Compound Annual Growth Rate between 19.9 percent to 25 percent through to 2018,” Odeluga added, looking to the company’s bright future.
“If that’s even half right, Netflix can afford to drop even $100 million on net income next year and still come out on top before 2018, when streaming/VOD is widely expected to overtake DVD/Blu-Ray,” he said.
Stern Agee predicts that by 2020, Netflix will have 150 million global subscribers. The analysts at that investment house shrugged off the streaming company’s earnings per share miss as mostly a foreign exchange currency issue. In other words, no one is worried for Netflix.