Shares of Netflix (NFLX - Free Report) moved nearly 2.5% higher in early morning trading Wednesday after the video streaming behemoth received its most bullish analyst call to date.
The call came from analysts at Goldman Sachs, who reiterated the firm’s buy rating for NFLX and increased its price target to $490 from $390. That projection would represent a nearly 35% upside to Tuesday’s close and, according to FactSet, marks the highest target out of the 36 analysts who cover Netflix.
“We believe the growing content offering and expanding distribution ecosystem will continue to drive subscriber growth above consensus expectations,” Goldman’s Heath Terry wrote in a note to clients.
The firm also raised its revenue estimates for Netflix. Shares of the streaming giant opened at $367.53, slightly more than 1% above Tuesday’s closing price—despite feeling pressure in after-hours trading in the wake of a major deal in the telecom and media space.
Indeed, yesterday afternoon a federal judge approved AT&T’s (T - Free Report) $85 billion merger with Time Warner , paving the way for massive new company which can leverage AT&T’s distribution infrastructure with Time Warner’s deep library of original content.
Changing consumer trends and consumption habits have created widespread consolidation in the telecom and entertainment industries, with network operators like AT&T desperate to own both the connection its customers use and the content they are accessing.
The merger creates another massive competitor for Netflix, which is already facing off with HBO’s over-the-top offerings and the live programming advantages of Turner Broadcasting.
The judge’s decision will also likely inform other pending media deals, including Disney (DIS - Free Report) and Comcast’s (CMCSA - Free Report) battle for 21st Century Fox assets.
Still, Goldman’s bullish note is part of a larger trend of positive analyst sentiment for Netflix recently. The company has witnessed 14 positive revisions to its full-year EPS estimates within the past 60 days—compared to just three negative revisions in that time.
This positive revision trend has lifted the Zacks Consensus Estimate for Netflix’s current fiscal year earnings by 14 cents. Analysts now expect the video streaming company to witness EPS growth of more than 130% in 2018.
Optimism surrounding Netflix’s original content initiatives, continued subscriber growth, and improving margins has made the stock one of Wall Street’s hottest tech picks in the past year, with today’s movement adding to its nearly 140% one-year gains.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>