Netflix is missing out on this market comeback, but Piper Jaffray says buy the dip

Netflix is missing out on the broader market’s rally, but don’t give up on the stock, says Piper Jaffray.

The firm reiterated its overweight rating on the stock and its $440 price target.

“Despite an onslaught of new streaming services currently casting a cloud of concern over NFLX shares, we expect the company will continue to capture a significant portion of traditional content dollars, as those dollars migrate to streaming,” said Piper Jaffray’s senior research analyst Michael Olson in a note to clients on Friday.

Shares of Netflix are lagging the broader market right now, down 2% this month while the S&P 500 is up nearly 3% in September. Investors are cautious on the company with other new streaming launches from Apple, Disney and HBO on the horizon. Netflix’s stock took a dive on Tuesday after Apple announced its original TV service will cost $4.99 a month and launch Nov. 1. Netflix raised the price of its subscription plan to $8.99 in January.

Piper Jaffray is optimistic third-quarter subscriber numbers for Netflix will come back from a disappointing second-quarter, that caused the stock to tumble. The firms analysis points to third-quarter subscriber additions that are in-line with estimates for domestic additions and potentially above expectations for international additions.

Olson estimates third-quarter domestic subscription growth will be around 6.4% year-over-year and international growth in a range of 33% to 35%.

Netflix’s content slate in the second half of 2019 is much stronger than in the second-quarter, Olson added. A new season of The Crown and several original films such as El Camino: A Breaking Bad Movie and The Irishman from Martin Scorsese are expected to boost subscribers.

“There should be a positive impact from an improving slate and we are, therefore, optimistic about the company’s opportunity to grow subscriber additions y/y on a FY basis,” said Olson.

Shares of Netflix were 1.2% higher in premarket trading on Friday.

— with reporting from CNBC’s Michael Bloom.