Is Oppenheimer Right About Netflix?

The streaming video service gets a timely analyst upgrade.

Apr 7, 2014 at 11:03AM

The sector rotation out of tech is creating some tempting buying opportunities, and at least one analyst thinks that one recently rebuffed market darling is ready to bounce back. Oppenheimer is upgrading shares of Netflix (NASDAQ:NFLX) this morning -- from perform to outperform -- arguing that the recent sell-off is overdone.

It has certainly been a swift and brutal turn for the leading video service. The stock has closed lower in 19 of the past 22 trading days since peaking at $458 a month ago. It has gone on to shed 26% of its value in that time. It's telling that Oppenheimer's 12-month price target of $419 may have been a bearish call several weeks ago, but now it represents a respectable 24% return from where it closed on Friday.

The sharp correction in Netflix shares wasn't triggered by any particular negative catalyst. Even last week's debut of's (NASDAQ:AMZN) Fire TV -- the leading online retailer's $99 set-top media player that favors streaming through Amazon's own digital ecosystem over Netflix and other platforms -- can't really be considered a reason for Netflix investors to worry. Amazon's stock closed lower in each of the three trading days since it introduced Fire TV last Wednesday.

This doesn't mean that Netflix is going to bounce back to $458, naturally. The slide over the past four weeks may have been unwarranted, but bears can argue the same thing about the bullish rally that made Netflix the best-performing S&P 500 component for all of last year.

Netflix rocks. It closed out 2013 with 44 million global streaming subscribers. If the guidance it issued earlier this year is on the mark, we should be looking at 48 million online accounts when Netflix reports its results for the first quarter two weeks from today.

It should be a solid report. Analysts see earnings skyrocketing to $0.82 a share, making this Netflix's most profitable quarter in years. Revenue is expected to climb 24% to nearly $1.3 billion If those goals seem ambitious, keep in mind that Netflix has blasted through Wall Street's profit targets with ease for three consecutive quarters.

Bears argue that competition is coming for Netflix, but no one outside of perhaps Amazon and, to a much lesser extent, Redbox, have come out with a cheap stand-alone streaming service with a digital catalog worth paying up for. Netflix investors should keep an eye on the success of Fire TV despite the lukewarm market reaction. Reviews have been generally positive outside of Amazon's decision to price its gadget at the high end of the existing range of set-top devices.

However, even if Fire TV succeeds, it will be just more validation for the Web-served video content revolution that Netflix has been leading for years. Time will tell if Oppenheimer was perfectly opportunistic with this morning's call or if it was too early, but Netflix's long-term direction remains bullish.

Just wait until you're streaming video on your wearable computing device
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.


Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers