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TheStreet Open House

Netflix Runs out of Steam as CEO Hastings Warns of 'Euphoria'

Oppenheimer analyst Jason Helfstein (Perform, $434 PT)

"We are raising our target on NFLX to $434, based on a bull-case scenario for 2018 subscribers. However, as this suggests only 12% appreciation based on after-hours trading, we are maintaining our Perform rating on valuation. After the close, NFLX posted another strong quarter and guidance, with US & International streaming subs up 24% & 113% y/y, respectively. US sub growth has been consistent since 4Q:12, while Int'l subs have only modestly slowed since the beginning of the year. Given our confidence in management's ability to control costs/margins, we are now valuing NFLX on 2018 US and Int'l streaming sub estimates of 54M and 59M, respectively, with EBITDA margins of 27%, a PE of 20x and 10% discount rate."

Jefferies analyst Brian Pitz (Underperform, $215 PT)

"With a modest beat and 4Q outlook above consensus, NFLX now trades at 110x our new '14 EPS. We find it difficult to justify this val'n given the risks of rising content costs, heavy competition, and the likelihood NFLX may need to raise add'l capital to fund operations. Our model gives NFLX plenty of credit for go-forward growth and margin expansion, our 4Q ests are above Street...yet we still see 45% downside to after hrs share price. Reiterate Underperform."

Cantor Fitzgerald analyst Youssef Squali (Hold, $350 PT)

"Netflix reported a quarter that was virtually in-line with expectations on the P&L but better on sub metrics, which bodes well for 4Q:13 and beyond. The model seems to be working beautifully, and we remain fans of its disruptive nature longer-term, given the service's expanding selection, improving personalization, low price and position as a key beneficiary of the rise of Internet TV. Strong momentum and a large short position (13% of float) are likely to move the stock higher short-term, in our view; that said, current valuation keeps us on the sidelines."

-- Written by Chris Ciaccia in New York

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