With the recent debut of hip-hop historical drama The Get Down and the second-season premiere of Golden Globe-nominated crime series Narcos days away, Netflix (NFLX) - Get Report continues to release a stream of high-profile originals.
But as the company's subscriber rolls hit 47 million in the U.S., and 36 million internationally, there are differing views on whether Netflix is overpriced or undervalued at the nearly $98 per share it was trading at on Monday afternoon.
Axiom Capital Management analyst Victor Anthony initiated coverage Monday with a sell recommendation, and set a target of $80 per share, or nearly 20% below its current price.
Meanwhile, Mark Mahaney of RBC Capital Markets on Friday reiterated his outperform rating with a $130 per share target, suggesting more than 30% in upside.
The difference depends upon how well Netflix co-founder and CEO Reed Hastings can fend off competition, retain customers as it boosts prices, generate content for foreign markets and face other challenges at the leading edge of Internet video.
Axiom's Anthony wrote that he is "down" with "The Get Down," and likes the company's content library and the "leading role in disrupting" traditional pay-TV. "However, we see rising competition, diminishing pricing power, and rising content costs putting pressure on Netflix's ability to meet consensus longer-term subscriber growth and profit estimates," Anthony wrote, adding that the "super-rich multiple" requires "near flawless execution."
Netflix trades at 48 times Axiom's projected 2017 Ebitda, compared to Alphabet's (GOOGL) - Get Report valuation of 11 times projected Ebitda and Facebook's (FB) - Get Report forward multiple of 14 times.
"Investors are paying up for sub growth and international margin expansion that Netflix may not deliver," Anthony concluded.
By contrast, Netflix is the top-rated buy stock for RBC Capital's Mahaney, who suggested in a note that customer churn in the U.S. may ease and overseas units can be as profitable as domestic ones.
RBC Capital has surveyed U.S. consumers for the last 20 quarters. Mahaney noted that 54% of respondents, who were polled viaSurveyMonkey, watch TV and movies on Netflix, while Google's YouTube scored 47% and Amazon.com (AMZN) - Get Report reached 30%. Meanwhile, the number of respondents who said they were "extremely likely" to cancel Netflix fell from 3% in May to 2% in August.
Netflix also scored well among subscribers to Amazon.com's Prime, which includes a competing video streaming service. "Amazon Prime Members -- despite access to a large amount of 'free' premium video streaming content -- are more likely to be Netflix subscribers than Amazon customers who aren't Prime Members," Mahaney wrote. "Go figure."
Looking overseas, Mahaney suggested original content would stem U.K. customer defections, while survey results from Brazil suggest that Netflix can grab 30% market share in other international markets.
RBC values Netflix's U.S. streaming business at 25 times its earnings, or $52 per share. The U.S. DVD rental unit is worth 10 times earnings, or $3 per share, Mahaney suggested, while valuing the more nascent international business at 7 times sales, or $77 per share. He rounds the total to $130 per share.
The gulf between $80 and $130 is wide, but Netflix has touched both levels in the last year. The company's 52-week low is $79.95, while its high for the period is $133.27.