NFLX upgraded by Bank of America Merrill Lynch# Stock
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重要思想，upgrade to Buy, added to BofAML US 1 List Constituent , target price $225, 分拆DVD是为了寻找未来买家，最有可能的是Amazon.
Media reports of an inevitable NFLX acquisition have been around for years;
problem was, however, that none of the potential technology-focused
acquirers
would want NFLX’s DVD business. The streaming business meshes well with the
strategies of several of the largest tech companies, particularly after
proving that
customers were willing to pay for the service. The most likely acquirer in
our view
is AMZN which faces the choice of spending heavily on content to build a
competing service or buying NFLX with stock in what we believe would be
accretive transaction even at a substantial premium to NFLX’s current price.
Buy-out becoming more likely
We have written on the media’s on-going speculation about potential Netflix
acquirers before and had concluded earlier that the most likely buyers who
have
the financial wherewithal to buy Netflix, namely the large Internet and tech
players, would not be interested in Netflix’s physical distribution
business. Now,
that has changed with Netflix effectively spinning their DVD business off
into a
completely separate operating entity that could be spun off or sold to
private
equity by a potential acquirer.
Amazon, the most likely acquirer
The most often cited buyer, and in our view the most likely, is Amazon.
Articles
such as “Amazon may again be mulling Netflix buy” from the WSJ and “
Amazon
Buys Netflix? Microsoft Is a Much Better Guess as a Potential Acquirer”
from
AllThingsDigital have suggested Amazon could purchase Netflix. We believe
Amazon likely couldn’t buy Netflix in the past because Netflix’s DVD
distribution
centers in virtually every state would have given Amazon “nexus” in those
states
for sales tax purposes, forcing them to collect sales taxes on every item
sold in
the US. Now, Amazon who has already shown a commitment to building a
streaming service, faces the choice of spending hundreds of millions to more
than
a billion a year building out a content library to compete with Netflix and
thus
significantly diluting earnings for the near term, or of buying Netflix with
stock and
jumpstarting their efforts with what should be a very accretive transaction
even at
much higher levels.
Our $225 price objective is based on 35x our 2012 Non-GAAP EPS estimate of
$6.42. This multiple is a discount to Amazon, which, like Netflix, is also a
category-killer which is changing how consumers view their industry, despite
better expected growth. Given our expected non-GAAP EPS growth of 37% in
2012 and 43% 2013, this multiple represents a PEG ratio of less than 1x and
a
discount to the eCommerce group.
Media reports of an inevitable NFLX acquisition have been around for years;
problem was, however, that none of the potential technology-focused
acquirers
would want NFLX’s DVD business. The streaming business meshes well with the
strategies of several of the largest tech companies, particularly after
proving that
customers were willing to pay for the service. The most likely acquirer in
our view
is AMZN which faces the choice of spending heavily on content to build a
competing service or buying NFLX with stock in what we believe would be
accretive transaction even at a substantial premium to NFLX’s current price.
Buy-out becoming more likely
We have written on the media’s on-going speculation about potential Netflix
acquirers before and had concluded earlier that the most likely buyers who
have
the financial wherewithal to buy Netflix, namely the large Internet and tech
players, would not be interested in Netflix’s physical distribution
business. Now,
that has changed with Netflix effectively spinning their DVD business off
into a
completely separate operating entity that could be spun off or sold to
private
equity by a potential acquirer.
Amazon, the most likely acquirer
The most often cited buyer, and in our view the most likely, is Amazon.
Articles
such as “Amazon may again be mulling Netflix buy” from the WSJ and “
Amazon
Buys Netflix? Microsoft Is a Much Better Guess as a Potential Acquirer”
from
AllThingsDigital have suggested Amazon could purchase Netflix. We believe
Amazon likely couldn’t buy Netflix in the past because Netflix’s DVD
distribution
centers in virtually every state would have given Amazon “nexus” in those
states
for sales tax purposes, forcing them to collect sales taxes on every item
sold in
the US. Now, Amazon who has already shown a commitment to building a
streaming service, faces the choice of spending hundreds of millions to more
than
a billion a year building out a content library to compete with Netflix and
thus
significantly diluting earnings for the near term, or of buying Netflix with
stock and
jumpstarting their efforts with what should be a very accretive transaction
even at
much higher levels.
Our $225 price objective is based on 35x our 2012 Non-GAAP EPS estimate of
$6.42. This multiple is a discount to Amazon, which, like Netflix, is also a
category-killer which is changing how consumers view their industry, despite
better expected growth. Given our expected non-GAAP EPS growth of 37% in
2012 and 43% 2013, this multiple represents a PEG ratio of less than 1x and
a
discount to the eCommerce group.