Morgan Stanley Upgrades Netflix (NFLX)

NEW YORK (TheStreet) -- Morgan Stanley upgraded Netflix (NFLX) to "equal-weight" from "underweight" Friday, just three weeks since downgrading the streaming video provider.

Shares of Netflix fell 0.3% to $403.53.

Regarding the previous downgrade, analyst Scott Devitt wrote that Netflix "would enter a period of slowing US sub growth before International users could offset the slowdown. We were wrong."

The analyst said expansion into France, Germany, Spain, and Italy may "represent an opportunity nearly the size of the U.S." Ever increasing Internet connection speeds in Latin America can also represent a bg growth opportunity for Netflix according to DeVitt.

The upgrade from Morgan Stanley comes more than a week after Netflix's quarterly earnings report that beat analyst expectations.

TheStreet Ratings team rates NETFLIX INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETFLIX INC (NFLX) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 24.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 507.69% and other important driving factors, this stock has surged by 162.88% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NFLX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • NETFLIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, NETFLIX INC increased its bottom line by earning $1.85 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($3.98 versus $1.85).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 513.1% when compared to the same quarter one year prior, rising from $7.90 million to $48.42 million.
  • Net operating cash flow has significantly increased by 356.05% to $41.45 million when compared to the same quarter last year. In addition, NETFLIX INC has also vastly surpassed the industry average cash flow growth rate of 36.17%.
  • You can view the full analysis from the report here: NFLX Ratings Report

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