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As House of Cards Nears, Netflix (NFLX) Stock Gains on Strong Analyst Sentiment
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Shares of Netflix (NFLX - Free Report) were up more than 3% in morning trading Thursday, hitting a new 52-week high in the process. The video streaming giant is feeling the full force of strong analyst sentiment just days before it is set to release the latest season of its Emmy-winning series House of Cards.
After closing at $157.75 on Wednesday afternoon, Netflix shares gained as much as 3.6% to a new 52-week high of $163.48 on Thursday morning. One of several drivers of today’s trading action was a price target change from Piper Jaffray; the analyst firm raised its target for the stock to $190 from $166.
Netflix also received a solid endorsement from Loop Capital analyst David Miller, who is eyeing the season five release of House of Cards as a key opportunity for the company.
“Recall the effects of Season #4 on the stock price—after becoming available for streaming on Feb. 14, 2016, NFLX ended up handily beating consensus views on subscribers, with domestic subs for that quarter coming in at 2.23 million (consensus at the time was 1.77 million), and International subs coming in at 4.51 million (consensus at the time was 4.38 million),” said Miller via Benzinga.
Miller reiterated his “Buy” rating and slapped a $180 price target on the stock. The fifth season of House of Cards is set to be released on the video streaming service on May 30.
The latest iteration of the fan-favorite series, which stars Kevin Spacey and Robin Wright, is the perfect example of what William Blair analysts are calling a “sequel opportunity.”
“By sequel opportunity, we mean the opportunity Netflix has to leverage content investments in proven series (measured by subscriber engagement) to increase the lifetime value of its subscribers and ultimately improve the company’s margins,” said Ralph Schackart and Kevin Kroeger.
House of Cards proves that Netflix has the ability to successfully leverage the popularity of its shows, allowing these series to gather momentum over their lifetime. Schackart and Kroeger identified Netflix’s more recent hits, such as Stranger Things, Making a Murderer, and 13 Reasons Why, as having fresh sequel opportunity.
“Sequels have the opportunity to extend successful Series 1 programs … and prolong Netflix’s content lead, in our view,” said the analysts. “Our analysis shows that Netflix has 50 original series entering at least a season 2, including 19 entering their third or later season. HBO is the closest to Netflix in our sample with 19, including 10 entering their third or later season.”
Investors will have to wait until Netflix updates its subscriber count in its next earnings report to see if there actually was another “House of Cards bump,” but the hype for the release is clearly evident right now.
Looking ahead, we expect this fiscal year to be one of strong earnings and revenue growth for Netflix. Now that the company has completed its international expansion, worldwide margins should begin to improve. Nevertheless, the stock remains a Zacks Rank #3 (Hold).
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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As House of Cards Nears, Netflix (NFLX) Stock Gains on Strong Analyst Sentiment
Shares of Netflix (NFLX - Free Report) were up more than 3% in morning trading Thursday, hitting a new 52-week high in the process. The video streaming giant is feeling the full force of strong analyst sentiment just days before it is set to release the latest season of its Emmy-winning series House of Cards.
After closing at $157.75 on Wednesday afternoon, Netflix shares gained as much as 3.6% to a new 52-week high of $163.48 on Thursday morning. One of several drivers of today’s trading action was a price target change from Piper Jaffray; the analyst firm raised its target for the stock to $190 from $166.
Netflix also received a solid endorsement from Loop Capital analyst David Miller, who is eyeing the season five release of House of Cards as a key opportunity for the company.
“Recall the effects of Season #4 on the stock price—after becoming available for streaming on Feb. 14, 2016, NFLX ended up handily beating consensus views on subscribers, with domestic subs for that quarter coming in at 2.23 million (consensus at the time was 1.77 million), and International subs coming in at 4.51 million (consensus at the time was 4.38 million),” said Miller via Benzinga.
Miller reiterated his “Buy” rating and slapped a $180 price target on the stock. The fifth season of House of Cards is set to be released on the video streaming service on May 30.
The latest iteration of the fan-favorite series, which stars Kevin Spacey and Robin Wright, is the perfect example of what William Blair analysts are calling a “sequel opportunity.”
“By sequel opportunity, we mean the opportunity Netflix has to leverage content investments in proven series (measured by subscriber engagement) to increase the lifetime value of its subscribers and ultimately improve the company’s margins,” said Ralph Schackart and Kevin Kroeger.
House of Cards proves that Netflix has the ability to successfully leverage the popularity of its shows, allowing these series to gather momentum over their lifetime. Schackart and Kroeger identified Netflix’s more recent hits, such as Stranger Things, Making a Murderer, and 13 Reasons Why, as having fresh sequel opportunity.
“Sequels have the opportunity to extend successful Series 1 programs … and prolong Netflix’s content lead, in our view,” said the analysts. “Our analysis shows that Netflix has 50 original series entering at least a season 2, including 19 entering their third or later season. HBO is the closest to Netflix in our sample with 19, including 10 entering their third or later season.”
Investors will have to wait until Netflix updates its subscriber count in its next earnings report to see if there actually was another “House of Cards bump,” but the hype for the release is clearly evident right now.
Looking ahead, we expect this fiscal year to be one of strong earnings and revenue growth for Netflix. Now that the company has completed its international expansion, worldwide margins should begin to improve. Nevertheless, the stock remains a Zacks Rank #3 (Hold).
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>