Netflix ( NFLX ) shares jumped on Tuesday after the internet television network received a pair of bullish analyst reports to start the new year.
[ibd-display-video id=3058944 width=50 float=left autostart=true] Loop Capital Markets analyst David Miller reiterated his buy rating on Netflix and labeled it his "best idea of 2018." He also raised his price target on the stock to 241 from 237.
Macquarie Research analyst Tim Nollen upgraded Netflix to outperform from neutral and raised his price target to 220 from 200.
Netflix shares surged 4.8% to close at 201.07 on the stock market today .
"Consumers' increasing lack of tolerance for advertising drives them to subscription OTT (over-the-top television) services, and Netflix is miles ahead of peers," Nollen said in a report. " Disney 's ( DIS ) eventual OTT service is still two years away, and won't threaten Netflix, which besides holding onto a strong U.S. subscriber base is establishing passion brand status in many international markets."
Netflix also is taking steps to improve the quality of its revenue and earnings to take its investor story beyond just subscriber growth, Nollen said.
Miller made similar comments.
"While last year's subscriber growth was notable, we expect to see true operating leverage out of Netflix this year, and we believe the company is poised to deliver that at a level well beyond what we witnessed in 2017," Miller said in a report.
IBD'S TAKE: Netflix stock has an IBD Composite Rating of 93, meaning it has outperformed 93% of stocks in key metrics over the past 12 months. For more analysis on Netflix, visit the IBD Stock Checkup .
Netflix is being judicious as it shifts from licensed content to a greater reliance on original TV shows and movies, he said.
"Cash flow concerns aside, Netflix's move to 60% original content may end up generating cost savings for the company if its comments regarding originals being cheaper per hour than licensed content hold," Nollen said.
Competition for viewers and original content is likely to remain stiff as Netflix goes up against Amazon.com ( AMZN ), Walt Disney and others, he said.
Apple ( AAPL ) is rumored to be entering the subscription video-on-demand business this year .
Citi analysts Jim Suva and Asiya Merchant believe there is a 40% likelihood that Apple will acquire Netflix, Business Insider reported Monday . Apple could use some of its $250 billion cash stockpile to acquire Netflix, they said in a note to clients.
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