As Netflix (NFLX) shares continue to trade down on turmoil over its price cuts and reduce subscriber outlook, Barclays Capital’s Anthony DiClemente today rushed to the rescue of the shares, reiterating and Overweight rating and a $260 price target.
Netflix’s decision to split itself in two — DVD-by-mail on the one hand, now rebranded “Qwikster,” and streaming operations on the other hand — makes sense, argues DiClemente.
“The rationale for Netflix having split itself into two discrete brands is that business decisions, employee culture, user interfaces, segment economics, and content acquisition can now be aligned by technology�old media DVDs versus new media video streaming,” writes DiClemente.
He continues that this will make for better product: “Separating the DVD-by-mail business better allows Netflix segment decisions to be made in the best interests of Netflix alone. For example, the Netflix user interface on an iPhone or iPad will be better optimized, given the interface will be meant for streaming subscribers only.”
DiClemente even advises Netflix might go further, splitting its domestic (North America) and Internetional segments of streaming: “Perhaps separating into three segments will better allow investors to value Netflix on a �sum-of-the-parts� basis, an exercise that would show upside to current depressed share price levels.”
DiClemente’s optimism is in stark contrast to the downgrade today — the second in three business days — by Caris & Co.’s David Miller.
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