Buy Netflix On The Pullback, SunTrust Says

Shares of Netflix, Inc. NFLX peaked just shy of the $425 level earlier this summer and with shares trading lower by nearly $75, investors may want to take advantage of the sell-off.

The Analyst

SunTrust Robinson Humphrey's Matthew Thornton upgraded Netflix from Hold to Buy but with a price target lowered from $415 to $410.

The Thesis

SunTrust's proprietary "Subscriber Tracker" gives insight into Netflix's subscriber trends based on Internet search trends and recent findings bodes well for the streaming video company, Thornton said in a note. Specifically, data through July suggests domestic subscriber additions of a little more than 0.7 million and 5.0 international subscription adds. This compares favorably to consensus estimates of a little under 0.7 million on the domestic front and 4.5 million internationally.

Other encouraging developments that justify a bullish stance on the stock:

Search data in India shows original content is resonating well with subscribers.
Recent price increases in Japan aren't seen as a negative.
Reports of Netflix moving away from billing through mobile app stores to avoid commissions could save 200 basis points in operating margin.