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Piper Jaffray Upgrades Netflix

Netflix (NFLX) reported 9 cents second-quarter earnings per share (GAAP), and raised its 2005 profit outlook. Piper Jaffray upgraded the stock.

Analyst Safa Rashtchy upgraded the stock to outperform from market perform. He says Netflix had a significant turnaround in the second quarter, fueled by power of lower prices and continued service excellence, which together cut its churn rate to 4.7% from first quarter's 5%. He says this allowed the company to spend much less on marketing and show a big upside.

Further, he notes that despite Blockbuster's (BBI) lower price and heavy promotion, Netflix continued to grow subscribers at 55% thanks to the power of the company's brand, expertise, and new pricing strategy.

After the second-quarter performance, he ups 27 cents for 2005 GAAP loss per share estimate to 2 cents EPS, and 3 cents 2006 GAAP EPS to 71 cents EPS, and his $11 price target to $24.

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