I’m buying Netflix, this portfolio manager says

Down sharply over the past 12 months but posting a nice rally more recently is Netflix (Netflix Stock Quote, Charts, News, Analysts, Financials NASDAQ:NFLX), a name which would seem to embody a lot of the market’s general fears over Big Tech and its purportedly waning growth prospects. But investors should be taking the streaming king seriously, says portfolio manager Kim Bolton of Black Swan Dexteritas, who just named it one of his top picks for the year ahead.

Bolton said the market is going to keep liking Netflix for its new ad-infused strategy.

“[Their] subscribers were coming down, but they still have 225 million subscribers around the world, which is phenomenal, in 190 countries,” said Bolton, speaking on BNN Bloomberg on Wednesday.

“But then they got on the bandwagon which really gave them a pop, especially with the analysts and investors, where they came up with their company’s ad plan,” he said. “That’s really given [the stock] a boost.”

Brought out this month, Netflix’s Basic with Ads offers a cheaper subscription plan involving ads for the first time since the company began streaming. The stock was down around $180 per share when Netflix announced the new plan in June and NFLX is now up above $300.

One booster is Bank of America, which yesterday reinstating a “Buy” rating on the stock, saying there’s likely a 24 per cent upside over the next 12 months. 

“Despite slower sub growth, we believe efforts to improve monetization via a value-oriented ad tier and significant conversion of password sharers has the potential to drive operating/financial upside,” said analyst Jessica Reif Ehrlich in a research note. 

Bolton said that getting NFLX down at around $295 or $280 per share would make for a great buy.

“We just picked this up. And you know what? It’s down a little bit today down, [but] the average analyst actually has a 12-month price target on Netflix of $375. You can see it on the charts where it’s just fell off a cliff back there in May because their subscriber numbers had come down,” Bolton said.

Netflix’s most recent quarter, delivered in mid-October, saw the company beat analysts’ top and bottom line forecasts, coming in with revenue of $7.93 billion versus the consensus expectation at $7.84 billion and EPS of $3.10 per share compared to the Street’s forecast at $2.13 per share. The company also added 2.41 net subscribers compared to the expected add of 1.09 million.