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Raising Our Target Price on Netflix

Written By Brian Hicks

Posted February 14, 2011

When Netflix hit a high of $145, we knew $200 wouldn’t be far behind, telling readers:

“It looks like Netflix just broke above the channel… and could be headed higher. Considering future growth, an $8 billion market cap is nothing. We could see $10… even $20 billion when all is said and done with this stock. Plus, with the momentum crowd jumping in, and quickly churning that float, there’s no telling how high this can run.”

But the NFLX run, we believed, was just getting started.

And we were right… as the stock just hit $245.

But, as The Wall Street Journal reports:

“Not to be a stick in the mud, but it’s worth thinking about how far Netflix has climbed. The stock is up 287% over the last 52 weeks. In 2011 alone, the shares are up 39%. That enthusiasm has translated into nosebleedingly high valuations. The stock is trading 83 times the last twelve month’s earnings and 52 times the consensus expectations for the next 12 months, according to FactSet.

Valuations like that entail a really high amount of risk. If the growth rate of the company starts to deviate even modestly from the sizzling rate Wall Street has priced in, the stock could get hammered.

Of course, with the amount of momentum there is behind this stock, it could very well keep rising for quite some time. Just do yourself a favor and don’t bet the kid’s college fund on it, alright?”

While we agree that NFLX is extremely overbought… it’s all about the blind momentum at this point. And it could push the stock to our new target of $300 by September.

An outrageous call? Sure.

But we were the same people that called for NFLX $200 when the stock traded at just $145.