Jefferies Continues To Find Netflix Attractive

Jefferies continues to find Netflix NFLX attractive as it believes that the company is best positioned to benefit from the industry's transition to streaming from DVD usage. A growing digital content library and attractive pricing are likely to keep subscriber growth robust for several more years. Jefferies is tweaking it's estimates on Netflix and reiterating its Buy rating with a $175 price target for FY11. This is based on higher content costs, higher postage fees, lower DVD usage and slightly lower ARPU and sub. growth. With Netflix's digital distribution push paying off through viral growth in streaming and record sub growth, management has increased its focus on acquiring content. Netflix should remain the dominant provider of subscription-based online streaming for the foreseeable future, given its base of more than 15 million subscribers, broad title selection, and exclusive content allowing Netflix the possibility for a modest price increase with minimal impact on churn, given its superior value proposition. The hike would comfortably offset margin pressures created by higher digital content acquisition cost. Risks to the target price include increased competition from Google, Apple, Amazon, and Hulu. NFLX closed Friday at $140.46