UBS Upgrades Netflix (NFLX) to Buy

UBS upgraded Netflix (NASDAQ: NFLX) from Neutral to Buy with a price target of $175.00 (from $136.00).

Analyst Doug Mitchelson comments "We see upside to 1Q17 subscriber guidance given momentum in Europe and LatAm, and modest improvements in Japan, as detailed in our UBS Evidence Lab analysis of app download data, while Netflix's leadership positions in the U.S., U.K. and Canada appear secure. Notably, this momentum is during a 1Q17 stretch where original content releases are light and 1Q17 growth had been pulled forward into 4Q16 per management due to 4Q16's strong originals – it would not have been surprising to see momentum soften in 1Q rather than the strengthening we are seeing. Also, Comcast commentary regarding the success of X1 integration of Netflix is encouraging and we expect ongoing churn reductions as Netflix adds more U.S. pay TV integration deals and as X1 penetrations rise. Note, we are less concerned with 2Q seasonality this year (a big issue last year) given easy churn comparisons against the 2Q16 price increases."

As for future potential for the stock, Mitchelson sees a chance that NFLX outperforms the consensus: "Netflix is certainly well-liked and not inexpensive, but we do see the potential for Netflix to exceed Street subscriber growth expectations and believe that concerns regarding competition and content costs are misplaced. One area of concern worth watching is the potential for Net Neutrality rules to be eliminated by the Republican FCC."

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $139.14 Friday.

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