Goldman Raises Earnings View, Boosts Price Target on Netflix
Goldman Sachs raised its 2011 through 2013 earnings estimates on Netflix in anticipation of higher prices after company separates its DVD-by-mail and streaming video plans.
New subscribers who want both services will have to buy separate plans totaling at least $16 per month, starting in September. Currently prices start at $10 a month.
Goldman analyst Ingrid Chung said in a report she expects 2011 earnings of $5.12 per share, 2012 earnings of $7.69 per share and 2013 earnings of $10.80 per share. She also reiterated the "buy" rating on Netflix stock and set a six-month price target of $330 a share.
"Given management's experience over the last two weeks, Netflix expects roughly half of its subscriber base to remain 'hybrid' subscribers paying 20 percent to 60 percent more than their previous plans," Chung wrote.
She said the company "is being sufficiently conservative" in its estimate of 740,000 in net third-quarter subscriptions "as we believe that the vast majority of cancellations resulting from the U.S. pricing increase have already occurred." Netflix announced its plan on July 12.
Chung added that "we believe that we are still in the early innings of the international growth story and of seeing the true earnings power of the company."
Netflix reported second-quarter earnings that beat expectations although it missed on revenue.
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Disclosure information was not available for Ingrid Chung but Goldman Sachs has a financial relationship with NFLX.