Netflix Investor Apathy May Set Up Near-Term Upside; Analyst Raises Target To $225

Analysts at UBS turned incrementally bullish on Netflix, Inc. NFLX as the company's third quarter guidance appears to be conservative.

Analyst Doug Mitchelson maintains a Buy rating on Netflix's stock with a price target boosted from $190 to $225 after proprietary checks found that subscriber growth seen in the second quarter sustained into the third quarter.

Netflix's third quarter earnings report is projected to show a U.S. net addition of 850,000 (versus a prior estimate of 750,000), the analyst noted. On the international side of the business, the streaming video provider is projected to report a net addition of 3.95 million (versus a prior estimate 3.65 million).

In fact, Netflix's third quarter appears to have been weaker in terms of original content release as the same quarter a year ago saw the debut of "Stranger Things." The current year also featured five fewer dramas and no new "smash hits" as "Ozark" only "did well." From this investors could reasonably conclude that Netflix's growth is being fueled more by its overall breadth of content, strong marketing and solid execution, the analyst suggested.

"Based on the lackluster stock performance this quarter (NFLX -6% vs. post 2Q highs) and investor expectations for an in-line quarter, we see near-term upside to shares if our analysis proves accurate," Mitchelson concluded.

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