Goldman Sachs Upgrades Netflix (NFLX) to Buy; Sees 34% Upside

Goldman Sachs upgraded Netflix (NASDAQ: NFLX) from Neutral to Buy with a price target of $590.00 (from $380.00) saying the global sub opportunity to drive sustained outperformance.

Analyst Heath Terry said, "As Netflix leverages the growth in the connected device ecosystem and continues to expand internationally, we believe subscriber growth will continue to exceed expectations, driving margin expansion through significant scale benefits in content sourcing, customer acquisition, and technology."

He added, "While Netflix has outperformed the sector significantly since a pricing misstep in 3Q11, at 26X 2015E EBITDA on almost 50% 3-year EBITDA growth compared to the Internet sector at 14X on 30% growth, we believe the potential for further outperformance is high."

Catalysts include:

Global opportunity. We estimate that Netflix’s addressable audience of subscribers will more than double over the next three years to 207m

ARPU. We believe the recent price increase is only one component of management’s ARPU expansion strategy... we believe the mix of multi-stream plans will increase, driving ARPU expansion beyond the basic $8.99 plan.

Estimates. We raise our 2014-2016 revenue and EBITDA estimates by 6% and 7% on average to reflect higher international subs and US ARPU

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 $440.60 yesterday.

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