Why Netflix Weakness Is Called a Buying Opportunity

Everyone’s eyes have been on Netflix Inc. (NASDAQ: NFLX) for the past month, whether it is literally watching the shows or watching the stock. The stock hit its 52-week high in late February at roughly a 17% premium over current prices. At the same time, the third season of the Netflix hit show “House of Cards” was released. Is this just a coincidence? Oppenheimer thinks not.

Considering the drop-off from the highs, Oppenheimer suggests that now would be a good time to pick up the stock and the remote because a record number of tier-1 original show launches are coming up.

According to the firm:

History suggests that tier-1 original shows have the highest impact on net subscriber additions. Recall that NFLX did not have House of Cards or Orange Is the New Black when the service launched in France and Germany, as these series had been licensed to cable. However, over the next four months, NFLX will premiere five new shows on a global basis. [In addition,] Google Trends data suggests solid momentum in several major geographies.

There is another thing to consider in the near term. Increased competition concerns might have caused shares to sell off over the past two weeks. HBO Go, Dish’s Sling TV, Sony’s PlayStation Vue and Apple’s desire to launch a subscription video service all pose threats to Netflix.

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Yet Netflix has the competitive advantage of pooling data from its existing users to make better programming decisions around original content. As such, Oppenheimer believes that Netflix will have a better global “hit-rate.”

Data since October 5 show solid momentum in Brazil and Italy, with near-term improvement in all other territories since March 8. As a result, Oppenheimer forecasts international growth to be 24% for 2014 to 2017.

Shares of Netflix were up 1% at $422.57 early Wednesday. The stock has a consensus analyst price target of $443.72 and a 52-week trading range of $299.50 to $489.29.

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