Netflix Shares Worth $68 As It Continues To Burn Cash: Wedbush

Although Netflix, Inc. NFLX now has more quality content than it had previously and has had “its share of hits,” the cost of content continues to rise. The company continues to “burn cash to fund its acquisition of original and exclusive content,” Wedbush’s Michael Pachter said in a report.

Pachter reiterated an Underperform rating on Netflix, while raising the price target from $60 to $68. He believes the company’s stock is overvalued.

While Netflix continues to burn cash to acquire content, its international profitability would likely remain under pressure, due to intensifying competition for both content and subscribers, and its domestic growth is expected decelerate.

Q4 Results Ahead Of Expectations

Netflix added 1.93 million net domestic subscribers in Q4, versus the Wedbush estimate of 1.45 million. The company added 5.12 million net international subscribers, ahead of the Wedbush estimate of 3.75 million.

Revenue came in at $2.478 billion, beating the Wedbush estimate of $2.475 billion and consensus of $2.465 billion. GAAP EPS was also ahead at $0.15, compared to the Wedbush estimate and consensus of $0.13.

“However, we note that worldwide, Netflix added 7.05 million net streaming subscribers, and spent all of its $67 million in net income PLUS another $639 million in negative free cash flow ($100 per new sub) to build its content library,” Pachter wrote.

The stock was up more than 8 percent at $144 early Thursday morning.