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Netflix Finds Analyst Love

1 Jul, 2008 By: Erik Gruenwedel

Netflix Inc. July 1 got a boost when Needham & Co. analyst Charlie Wolf said increased subscriber loyalty in the current quarter mandated a revised upward “fair value” estimate of the service's share price.

In a research note, Wolf increased the Los Gatos, Calif.-based online renter's stock valuation to $25 from $22 and upgraded the service's stock status to “Hold” from “Under Perform” due in part to its ability to retain subscribers longer and reduce churn (the number of customers who cancel subscriptions).

Netflix, which last month began offering subscribers a $99 set-top box to stream movies from its catalog directly to the TV instead of the PC, has had difficulty keeping up with demand.

“This materially underestimated the value of the company, because profitability of the subscriber increases with the length of time he maintains his subscription,” Wolf wrote.

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