Piper Jaffray Lifts Netflix's Price Target To $420

Piper Jaffray's deep-dive into search trends bodes well for Netflix, Inc. (NASDAQ: NFLX) ahead of the company's second-quarter earnings report in July.

The Analyst

Piper Jaffray's Michael Olson and Yung Kim maintain an Overweight rating on Netflix with a price target lifted from $367 to $420.

The Thesis

Analyzing Google search trends is a method used to gauge consumer interest and subscriber levels, the analysts said in a note. Through the first two months of the second quarter, search data suggests a "strong" quarter for international subscribers and if trends hold subscriber growth outside of the U.S. should grow by 48.7 percent and exceed current consensus estimates of 40.9 percent growth.

Search trends suggests Netflix's domestic subscriber growth should come in at 11.9 percent in the second quarter, which is also above the consensus estimate of 11.5 percent, the analyst said.

The search trends include just two of three months in a quarter, Olson said, so any projections at this point is prone to error. But the findings imply a "high likelihood" of a strong second quarter for Netflix in terms of subscriber additions, especially the international market

The new $420 price target is based on a 70 times multiple on 2020 estimated EPS of $6.58 and assumes more than 75 percent average EPS growth in 2018, 2019 and 2020.

Price Action

Shares of Netflix were trading higher by more than 1.6 percent Tuesday at $396.69. The stock is up more than 102 percent in 2018.

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