Stock Picks: Netflix, Nike, Discover, National Semiconductor

Wall Street analyst opinions on stocks making headlines in Friday's market

Netflix Inc.: Morgan Stanley analyst Scott Devitt lowered a recommendation on shares of Netflix Inc. (NFLX) to equal-weight from overweight on Mar. 12.

In a note, Devitt said the rating change on the largest U.S. mail-order movie-rental service was based on the stock's valuation. "We remain positive on Netflix's core DVD-by-mail and digital offering, but the recent rally in [the] share price, expectation of future earnings beats, longer-term potential hike in postal rates, [and] competition from Redbox and emerging digital players lead us to look elsewhere for investment ideas," the analyst wrote.

Devitt noted that Netflix's shares were 59% since mid-August, vs. gains of 19% for the Nasdaq composite index and 15% for the S&P 500 index.

"We think Netflix shares are fairly valued and that short interest of [nearly] 19% could provide near-term support if the company continues to beat [or] meet expectations as we expect," Devitt wrote. "We believe Netflix's hybrid distribution model (physical DVD-by-mail and digital streaming) positions the company favorably to capture meaningful share of the video/TV rental market."

The analyst has a price target of $68 on the shares.

Nike Inc.: Susquehanna Financial Group analyst Christopher Svezia reiterated a neutral rating on shares of Nike Inc. (NKE) on Mar. 12.

"We believe global sales trends continue to show sequential improvement and leaner inventories should lead to better margins" for the world's largest athletic-shoe maker, the analyst wrote in a note. "[W]e expect a more moderately paced margin recovery as investments accelerate and believe the current valuation is balanced against this backdrop".

Svezia noted that Nike reports third-quarter earnings after the close of trading Mar. 17. He said his third-quarter EPS estimate of 90 cents is 2 cents above the Wall Street consensus view. He raised his fourth-quarter EPS estimate to $1.00 from 95 cents in anticipation of continued gross margin gains from "clean" inventory and fewer markdowns. He hiked his EPS estimates for fiscal 2010 (ending May) to $3.71 from $3.64 and for fiscal 2011 to $4.08 from $3.92.

"We believe a moderate near-term growth outlook and the recent share price run leaves valuations balanced with little room for near-term upside as shares approach all-time highs," Svezia wrote.

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