Ride Netflix’s Upgrade To 20% Upside
Wall Street’s big banks, and particularly their analyst corps, are notoriously late to the party when it comes to upgrades.
#-ad_banner-#Yet being late doesn’t mean they’re wrong. In fact, their delayed arrival often gives the stock a bullish jolt.
That’s precisely what happened this week when Goldman Sachs upgraded video-streaming company Netflix (Nasdaq: NFLX) from “neutral” to “buy.” Goldman also raised its price target significantly, to $590 from $380, an increase of more than 55%.
In its note to clients, Goldman said that Netflix has the potential to more than double its global subscriber base over the next three years. The renewed optimism from Goldman comes as Netflix continues to expand its footprint internationally, which includes a big push into Europe.
In late May, Netflix announced plans to launch its streaming video service in six European countries, including the two biggest European markets, France and Germany.
So how late to the party were Goldman’s analysts? Well, shares were trading 16% above their previous $380 target before the upgrade hit the wire. NFLX has more than doubled in the past year, and over the past 24 months, it is up an incredible 583%.
Of course, Goldman’s arrival livened up the party, as NFLX jumped 6% Tuesday to a new all-time high.
But it hasn’t been all fun and games for NFLX shareholders. The stock took a beating in March and April on worries that growth and margins couldn’t be sustained. There were also concerns over competition in the space from Time Warner (NYSE: TWX) and HBO.
Then there was the fact that the stock enjoyed a nearly uninterrupted move higher from October 2012 through March of this year, which made it susceptible to some heavy profit-taking.
The stock has since recovered and now trades at a new all-time high — with Goldman’s blessing. I think we could easily see shares rise 20% over the next three months.
When you consider the massive gains in NFLX in recent years, a move of that size is really almost child’s play. But there’s no sense in turning down profits just because they are easy.
Action to Take –>
— Buy NFLX at the market price
— Set stop-loss 8% below entry price
— Set initial price target at $560 for a potential 20% gain in three months
This article was originally published at ProfitableTrading.com:
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