MACQUARIE: Netflix is leaps and bounds ahead of the competition

Carlos Alvarez / Getty

• Shares of Netflix spiked Tuesday morning after Macquarie gave the stock a $220 price target.
• The bank says Netflix will continue to dominate any existing and future streaming service.

Shares of Netflix spiked 4.42% Tuesday morning, crossing $200 mark for the first time since October, after Macquarie upgraded the streaming video giant from neutral to outperform.

The upgrade was "part of a broad realignment of views on media," analyst Tim Nollen said in a note to clients Tuesday. "Where we prefer companies with subscription over ad-driven content, and scaled distribution with an international presence. We also appreciate the improving quality of Netflix's revenue and earnings."

As annoying ads continues to drive consumers to subscription streaming services, Netflix is "miles ahead of its peers," the bank said. Even Disney, which plans to launch its own service and yank its content form Netflix in 2020, "won't threaten Netflix."

Macquarie now has a price target of $220 for shares of Netflix - 10% above Tuesday's prices and roughly in-line with Wall Street's consensus target of $217.

Netflix will report fourth-quarter 2017 earnings on January 22. Analysts polled by Bloomberg, as well as Macquarie, expect the company to report earnings of $0.416 per share. In October, Netflix reported third-quarter earnings of $0.29 per share, lower than the expected $0.322.

"Quality of revenue and earnings are important," the bank said. "We believe Netflix is taking several steps to improve this beyond the market's obsession with sub numbers to date. On the revenue side, a second round of price increases is now coming through."

Shares of Netflix gained 56.48% in 2017, more than doubling the S&P 500's 19.14% benchmark in the same period.

Markets Insider