Collins Stewart Initiates Coverage on Netflix (NFLX) with a Buy; Unparalleled Competitive Advantage

November 17, 2009 7:57 AM EST

Collins Stewart initiates coverage on Netflix, Inc. (Nasdaq: NFLX) with a Buy. Price target $73.

Collins analyst says, "In our view, NFLX has developed an unparalleled competitive advantage in the DVD rental biz by crafting a well thought-out strategy based on operational excellence, cost advantage, maintaining complex relationships with studios, staying focused on DVD rentals, and lately enhancing its core offering by adding streaming. These building blocks are also barriers to entry to competitors. We believe the fundamental strength of the core DVD rental biz is improving and not fully appreciated. Plus, the near and long-term benefits of streaming are also under-appreciated and the perceived risk from streaming and kiosks are overblown...Netflix continues to gain market share with revenue and subscriber growth in excess of 20%. In the core online DVD rental business, we believe Netflix will grow its subscriber base, reduce SAC, keep churn modest, and continue to generate superior economic returns. We believe by 11 Netflix can capture 28% share of the DVD rental market. We are estimating top-line growth of 24% and bottom-line growth of 28% for NFLX from 08 to 11...Finally, given deep stakes by Apple (Nasdaq: AAPL) and Amazon (Nasdaq: AMZN) in digital media, NFLX fits nicely with these companies strategies and could be a potential take-out."

To see more analyst ratings on NFLX Click Here.

Netflix, Inc. provides online movie rental subscription services in the United States.

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