Thursday, August 23, 2012

Netflix, Inc. (NASDAQ:NFLX) Set to Turn the Corner – Analyst Note

Is Netflix, Inc. (NASDAQ:NFLX) on the mend? That's what analysts think - that the worst may be over for the company whose shares have seen a sharp decline from the high of $305 they touched in July 2011.

In the past five days it has risen nearly four percent and in today’s session the stock is up 0.69% to $65.85.

Caris & Co's analyst David Miller, who recently upgraded the stock said that the video streaming operator is likely to get financial relief from a deal with pay-TV channel Epix, that was made two years back.

Part of the company' woes may be of its own making. Last year when the stock was riding a wave of popularity, the company suddenly jacked up the prices of its Internet video streaming services and DVD rentals by up to 60 percent. This infuriated its subscribers and the company saw a fall in subscriptions.

Can NFLX Hit $100 by This Year? Find Out Here

However the Epix deal is expected to start bearing fruit later this year. Under the terms of the five-year contract that the two companies signed, Netflix gets exclusive online rights to films released by Paramount, Lionsgate and MGM. There is also a provision in the agreement that in the final three years of the deal Epix can license the internet video rights to competing services.

According to Miller, this means that Netflix will not have to pay as much for the rights as in the earlier two years, since the content can also be sold elsewhere.

Miller feels that Netflix's forecast for next year has been underestimated. The average 2013 earnings estimate among analysts stands at 93 cents per share, down from an average of $2.09 per share before the July 24 release of Netflix's second-quarter earnings.

"We believe that consensus figure is simply too draconian, and is the result of estimate revisions based on emotion rather than analysis," Miller wrote in his research note.

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