Netflix Has Been Trailing the Market. Why One Analyst Decided to Get More Bullish.

Netflix shares were getting a boost on Tuesday from Argus analyst Joseph Bonner, who raised his rating on the streaming video giant’s stock to Buy from Hold, setting a price target of $650.

“Netflix continues to produce popular original content, while also expanding globally, adding new subscribers, and strengthening its industry position,” Bonner wrote in a research note. “We believe that it has sustainable structural competitive advantages in the streaming video space.”

As Bonner points out,the company recentlysaid it expected to become sustainably free cash flow positive in the near future. “While valuation metrics for Netflix remain well above the peer average, they have improved with the recent selloff and in our view provide investors with an appropriate entry point,” he wrote.

Bonner thinks Netflix (ticker: NFLX) shares simply look cheap. He points out that while the stock is up 54% over the last 12 months, that trails gains of 62% for the S&P 500, 83% for the S&P Media and Entertainment index, and 142% for the NYSE’s FANG+ index. He notes that the stock trades for 33 times forward estimated Ebitda (earnings before interest, taxes, depreciation, and amortization), about a 124% premium to peer media and entertainment stocks, but below the two-year historical average premium of 159%.

Netflix was up 3% in Tuesday morning trading, to $538.57.