From Standard & Poor's Equity Research
NetFlix (NFLX) shares rose after JP Morgan upgraded the stock to overweight from underweight.
Analyst Barton Crockett says he believes investors are overly concerned about growth risks tied to technology change. He also believes investors are understating the company's subscriber growth potential in the medium term, and overreacting to fears of competition from cable video on demand and nascent Internet downloading.
Conversely, Crockett notes that if subscriber growth were to lag, he believes management would likely focus on maximizing earnings, also supporting upside in NetFlix shares.
He sees NetFlix reaching 16 million subscribers by 2010. He forecasts earnings per share of 52 cents in 2006 and 76 cents in 2007.