Tuesday, April 23 14:40:02
Shares of Netflix shares are set to open 24pc higher after the movie streaming service said it added more than two million U.S. subscribers in the last quarter, with analysts saying a push for exclusive content will boost margins.
Netflix shares have tripled in the past eight months, taking its share price to a sky high 137 times expected earnings, compared with a PE ratio of around 14 for others in the sector.
The shares traded premarket today at $215.81, up from $174.36, after first-quarter results on Monday beat analysts' estimates.
Despite the already big jump, at least eight brokerages, including JP Morgan, BMO Capital, Morgan Stanley, Barclays and Oppenheimer & Co, raised their price targets on the stock by as much as $75 to as much as $250.
"Netflix is in an enviable position with its scale and can opportunistically bid on content not available to the company previously." Morgan Stanley analyst DeVitt said in a note.
However some analysts see the shares as overcooked. While upgrading its outlook for the stock, Wedbush Securities gave a 12-month price target of $65 and rated it "underperform."
Netflix now has 29.2 million U.S. customers for its $8-a-month U.S. streaming service, the largest part of its business.
"The solid performance in the March quarter combined with a better-than-expected outlook for the June quarter, aided by the upcoming release of 'Arrested Development: Season 4,' augurs well for the company in 2013 and beyond," BMO Capital Markets Corp analysts said.
"Arrested Development", dropped by network TV but later revived on Netflix, will premiere on May 26 with the entire 15-episode season available to stream online.
"Four billion hours were streamed in the quarter -- highlighting how the company's subscriber base is increasingly using Netflix for a growing share of their viewing trends," BMO said.
As well as boosting subscriber numbers, the push for exclusive content will likely boost margins in line with its premium TV network peers, compounding the effect, DeVitt wrote.
Netflix has been pushing for original shows and its February release of the series "House of Cards", a drama starring Kevin Spacey, generated plenty of buzz just as more and more viewers turn onto Internet video downloading. Reuters