Netflix stocks ended the week on a low note, declining nearly 2% on Friday to close at $ 429.32, but a Wall Street analyst affirmed its "buy" rating, saying the company has "a large number of subscribers. "
The streaming stock has decreased for five consecutive sessions, its longest streak since February. In the midst of the recession, on Tuesday, it set a record $ 458.97. In a turbulent market, it has fared much better than media stocks, rising 30% in 2020 to date. Netflix reported in April that global subscriptions increased by 16 million in the first quarter as a result of widespread requests to stay home due to COVID-19.
Jefferies analyst Alex Giaimo, who just started covering Netflix on May 14, reiterated his "buy" rating on his shares in a note to clients on Friday, with a target price of $ 520 for 12 months.
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The company has "many subscriber leads ahead," Giaimo wrote, noting that he agrees with the upward thesis of double-digit subscriber growth for at least the next five years. With 182.8 million customers in more than 200 countries, skeptics consider the transmission giant to be too widespread. It also faces increasing competition from Apple, Disney and NBCUniversal, all of which have introduced cheaper subscription offers. WarnerMedia's HBO Max, the latest in a handful of well-funded competitors, launches Wednesday at a list price higher than Netflix, $ 15 a month.
Netflix "remains in" land grabbing "mode," Giaimo believes, meaning he is spending many times the level of his rivals, investing the money from subscription earnings on his massive content channel. Focusing on the company's free cash flow, which had been negative until recently, is not the best way to evaluate the company, the analyst argues. "At some point in the future, OTT will evolve into a mature competitive market, at which point the scrutiny of margins will make more sense," he wrote.
The company anticipated the broader changes in the media sector, which is dramatically shifting toward streaming, although many legacy media companies are taxed by 20th-century assets. "Linear competition is hurting, and the lack of sports is resulting in significant advertising pressure," wrote Giaimo. “The media paradigm has changed. Netflix now has the first look at content acquisition rather than the last, a significant advantage in the future. ”