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Netflix is a cheap and smart buy after a recent pullback as the Hollywood strikes continue, according to Loop Capital. Analyst Alan Gould upgraded the streaming giant to a buy from a hold and raised his price target by $75 to $500. His new target implies a 22.9% upside over Thursday’s close. “We have been fundamentally strong believers in NFLX, but cautious on valuation,” he said in a note to clients. “NFLX has corrected ~15% from its recent gains, but more importantly, the fundamentals continue to improve in NFLX’s favor.” Netflix has had a tough August, down more than 7% since the month began. Still, the stock is up about 38% on the year. Gould noted that competing streaming platforms have raised prices while reducing spending on content, a recipe that he said can help bolster Netflix’s competitive position. And even as more competitors enter the field, he said Netflix has been able to keep its share of engagement. He also said the company is best positioned for the Hollywood actors and writers work stoppages. That’s because of the relatively large pipeline of unreleased content that can tide the streamer over, as well as global production capabilities not impacted by the strike that can be tapped. In some ways, he said the strikes could even be considered a boost for Netflix and other streamers as they are seen as accelerating the decline of the traditional TV business. Elsewhere, Gould noted that the implementation of paid password sharing has gone better than was expected. Advertising can become a “major contributor” for the streamer over time, he said. — CNBC’s Michael Bloom contributed to this report
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