Even as competition intensifies in the streaming video market, Netflix (NFLX) likely will continue to lead the pack, a Wall Street analyst said Wednesday. Investment bank Jefferies initiated coverage of Netflix stock with a buy rating.
“We believe Netflix has separated itself as the premier, must-have OTT (over-the-top TV) service,” analyst Andrew Uerkwitz said in a note to clients. The company’s significant free cash flow will allow it to “prime its original content pump” and capitalize on its existing momentum, he said.
Netflix probably will spend over $100 billion on content over the next five years, Uerkwitz said.
Also, fragmentation in the market could play in Netflix’s favor, he said. “We see Netflix holding its premier position,” Uerkwitz said.
Netflix Stock Seen Moving Sideways Near Term
“We’re assuming coverage of Netflix stock right as the company turns the corner toward positive free cash flow and return of capital,” Uerkwitz said. He set a price target on Netflix stock of 620.
In afternoon trading on the stock market today, Netflix stock dipped 0.4%, near 484.50.
Despite Netflix’s rosy prospects longer term, “the near term looks terrible,” Uerkwitz said.
“With the sun shining, vacations starting back up, and a ‘return to normal’ being inevitable, there is little appetite for companies that benefited from everyone being indoors (during the Covid-19 pandemic) in 2020,” he said.
He sees more mergers and acquisitions on the horizon after the announcement Monday that AT&T will merge its media assets with Discovery (DISCA). Also, Amazon.com (AMZN) reportedly is seeking to acquire movie studio MGM.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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