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Evaluating Netflix (NFLX) Stock At New All-Time High

Netflix NFLX stock climbed 3.41% on Thursday to close right around its brand new all-time high a day after Goldman Sachs GS analysts announced their extremely bullish outlook for the streaming video power. Now let’s see why the investment banking giant is so positive and take a look at some of Netflix’s current fundamentals to help investors see if they agree.

Goldman analysts reiterated the firm’s buy rating for NFLX on Wednesday and also upped their price target from $390 per share to $490 per share. This $100 increase represents a roughly 25% upside from Thursday’s closing price.

Meanwhile, Goldman’s new price target represents the highest out of the 36 analysts who cover Netflix stock, according to FactSet. The firm also raised its revenue estimates for 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.

Goldman’s upgrade also follows a federal judge’s approval of AT&T’s T $85 billion merger with Time Warner TWX. The deal represents the formation of a more formidable competitor, with AT&T able to distribute Time Warner’s massive library of content, from HBO to CNN. 

Netflix could be under even more pressure depending on how Disney DIS and Comcast’s CMCSA pursuit of key Fox FOX assets shakes out. But Goldman provided a massive new price target for a reason: the streaming power is a force to be reckoned with in the new age of entertainment.

Stock Price Movement

At this point, it is hardly a secret that Netflix has been one of the best-performing stocks on the market. In fact, over the last five years, shares of NFLX have skyrocketed by 1,100%, which crushes Amazon’s 520% climb and blows away the S&P 500’s roughly 74%.


Investors can see that this trend continues over the last two years as well. Year to date, Netflix stock is up a whopping 105%. With that said, Netflix’s growth story looks far from over.

Other Fundamentals

Netflix wisely began spending billions of dollars on its own original content a few years back after seeing the outsized impact the company was making on the entertainment and television industry. The company understood that one day in the not-too-distant future the Disney’s and Fox’s of the world would simply begin asking for too high of a premium or pull their content altogether in order to start their own over-the-top streaming services. This is exactly what Disney plans to do when it rolls out its own standalone streaming platform in late 2019, once some of its current Netflix’s contracts end.

Netflix will have to continue to produce their own worthwhile shows and movies going forward as Amazon AMZN and others spend more as well. With that said, people clearly think that Netflix’s content offerings are worth the $13.99 a month price tag that it charges for its premium subscription, which includes Ultra HD and the ability to watch on four screens at once.

Netflix added 7.41 million new members in the first quarter, which marked a 50% jump from the year-ago period and topped the company’s forecast of 6.35 million. The streaming company closed the quarter with 125 million members. Looking forward to the second quarter, Netflix expects to add 6.2 million new members.

Growth Outlook

Investors will likely be impressed to see that Netflix’s second quarter revenues are projected to surge by 41.26% to reach $3.93 billion, based on our current Zacks Consensus Estimates. The company’s full-year revenues are expected to climb by nearly 38%.

Moving onto the other end of the income statement, the relatively young, growth-focused company’s earnings picture is starting to look much better.

Netflix’s adjusted Q2 earnings are projected to swing from $0.15 per share in the prior-year period to $0.80 per share, which would represent a 433% surge. For the full-year, the company’s earnings are expected to climb by 130% to touch $2.88 per share.

Furthermore, NFLX has witnessed 14 positive revisions to its second-quarter EPS estimates within the past 60 days against zero downgrades—which lifted our estimate by $0.15 per share. Meanwhile, during this same timeframe, Netflix has earned the same amount of full-year upward reversions compared to just three on the negative side, helping raise our estimate by $0.14 per share.

These positive earnings revisions trends, coupled with the fact that Netflix’s earnings are projected to grow so much should help show investors that the company is not only thinking about expanding its top line and adding more users, but that it has started to become a profit-focused company—because it has the infrastructure and the mindset to do so.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

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Time Warner Inc. (TWX) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report, Inc. (AMZN) : Free Stock Analysis Report
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