JPMorgan (JPM, Financial) has increased its price target for Netflix (NFLX, Financial) to $125 from $116.
JPMorgan finds the company is increasing its advantages over the linear TV market by providing differentiated content that viewers are able to view at any time. Netflix is gaining market share in the nonlinear TV market as viewers increase demand for Internet-connected media and on-demand video.
In the second quarter Netflix reported revenue of $2.1 billion with comparable quarter revenue growth of 28%. Revenue was $1.2 billion in domestic streaming. Revenue was $758 million in international streaming. Revenue was $138.7 million in domestic DVD.
Net income for the second quarter increased 55% from the comparable quarter to $40.76 million. Earnings per share for the second quarter were 9 cents.
JPMorgan’s outlook for the stock is positive. On Oct. 17 the company will report its third-quarter earnings results, which are likely to begin factoring in the improved market projections.
In JPMorgan’s upgraded price of the stock, the firm uses the following sum of the parts analysis to reach its $125 price target:
- 14x multiple on 2018E U.S. streaming EBITDA of $1.7 billion.
- 5x 2018E International revenue of $6.7 billion.
- 3.0x 2018E U.S. DVD EBITDA of $10 million.
Leon Cooperman (Trades, Portfolio) is one of the stock’s leading investors. He owns 0.09% of the outstanding shares which is nearly 1% of his portfolio. Cooperman added the stock to his portfolio in the second quarter.
In the past three months the stock has gained 13.99%. It is currently trading at $97.26.
Disclosure: I do not own any stocks included in this article.
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