Netflix (NFLX) Stock Rising on Higher Price Target

NEW YORK (TheStreet) -- Shares of Netflix (NFLXwere trading higher 0.3% to $615.12 in Monday's afternoon trading after analysts at Topeka Capital Markets upped their price target to $723 from $604.

Analysts said they lifted their price target due primarily to their master discounted cash flow matrix, which favors greater free cash flow generation in years 2019-2024.

Furthermore, they added that the popular American comedy-drama series Orange is the New Black will serve as a near-term catalyst for both the domestic and international subscriber lines.

This action also comes after Netflix said it is in talks with Chinese online broadcasting companies to enter China's online video market.

However, investors may be overlooking some of the inherent risks, as the Wall Street Journal reports that Netflix's content won't necessarily translate well, citing difficulties to see a show like Orange is the New Black resonating in China as much as it does in the U.S.

TheStreet Ratings team rates NETFLIX INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETFLIX INC (NFLX) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and premium valuation."

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

  • NFLX's revenue growth has slightly outpaced the industry average of 19.1%. Since the same quarter one year prior, revenues rose by 23.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for NETFLIX INC is currently very high, coming in at 83.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 1.50% is above that of the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market on the basis of return on equity, NETFLIX INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$127.38 million or 450.34% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: NFLX Ratings Report

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