Everybody Still Loves Netflix

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It doesn't seem to matter that Netflix (Nasdaq: NFLX  ) shares hit a new high this week, or that skeptics wince about its current valuation. Analysts continue to cozy up to the digitally savvy flick-rental service. A pair of investment banks have just waxed favorably about Netflix, though the company's share price may not have such a rosy outlook.

Credit Suisse upgraded the stock this morning from "underperform" to "neutral," dramatically raising its price target to $140. Analyst John Blackledge's near-term mark was a mere $90 before today.

Over at Barclays Capital, analyst Douglas Anmuth reiterated his rating on the stock, but lifted his share-price target from $100 to $128.

Both analysts are impressed with Netflix's ability to rapidly grow its subscriber base -- 15 million and counting -- as it broadens the digital library that it makes available to members on unlimited DVD plans at no additional cost.

However, if you pull up a quote on Netflix, you'll realize that the stock has overrun the optimism at Credit Suisse and Barclays. The stock closed at $143.12 yesterday, making price targets of $140 and $128 problematic for bulls, however drool-worthy Netflix's business model may be.

Clearly, Netflix is the only entity making a splash in digital delivery. (Nasdaq: AMZN  ) and Apple (Nasdaq: AAPL  ) continue to stick to their piecemeal pricing. Time Warner (NYSE: TWX  ) seems to get it with its HBO Go, and Comcast (Nasdaq: CMCSA  ) is on the right track with Xfinity, but those plans still require lofty cable bills to access their streaming content. Netflix remains the only game in town at an attractive price point.

That may change. Coinstar's (Nasdaq: CSTR  ) Redbox should reveal its digital strategy next month -- and it'll need a dirt-cheap price point, given its market positioning.

Until or unless it's toppled, though, Netflix is it in this space. Valuation concerns may keep the upside in check after the stock's torrid run in recent months. Netflix shares trade for more than 50 times this year's projected earnings, and nearly 40 times next year's target.

That's not cheap -- but convenient quality entertainment rarely is.

Is Netflix as overvalued as everyone seems to think? Share your thoughts in the comment box below.

Apple,, and Netflix are Motley Fool Stock Advisor selections. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 16, 2010, at 4:32 PM, Mstinterestinman wrote:

    Imo where around fair value considering a 30% growth rate and about 35 to 40 times forward earnings.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1303275, ~/Articles/ArticleHandler.aspx, 10/27/2016 1:11:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 3 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
AAPL $115.59 Down -2.66 -2.25%
Apple CAPS Rating: ****
AMZN $822.59 Down -12.59 -1.51% CAPS Rating: ****
CMCSA $62.56 Down -1.96 -3.04%
Comcast CAPS Rating: ***
NFLX $126.97 Up +0.46 +0.36%
Netflix CAPS Rating: ***
OUTR $0.00 Down +0.00 +0.00%
Outerwall CAPS Rating: **
TWX $88.70 Up +1.54 +1.77%
Time Warner CAPS Rating: ***