Goldman Sachs adds Netflix to 'conviction buy' list

Following a sell-off that cut the Netflix's value by a third, analysts at Goldman Sachs said the video streaming giant represents one of the most compelling investments available in the tech space.

Goldman reiterated its 'buy' rating and $400 price target on Netflix on Friday - an almost 50% upside from its closing price on Thursday.

Analysts also added Netflix to the investment bank's hand-picked collection of stocks considered more likely to deliver meaningful upside known as its "conviction list".

Analyst Heath Terry said: "With Netflix shares down 36% since record highs in July, and the S&P 500 down 10% over the same period, we believe Netflix represents one of the best risk/reward propositions in the Internet sector."

"We continue to believe Netflix's investment in content, technology and distribution will continue to drive subscriber growth well above consensus expectations both in the US and internationally."

Netflix has lost more than 25% of its value over the past three months and, while GS acknowledged the firm's rampant cash burn would likely push it back into the high-yield debt market over the next three years, the broker anticipates the group will double its annual content investment, helping it generate positive cash returns by 2022.

"We believe the fourth quarter will only be the beginning of the payoff from Netflix's accelerating spend and increasingly robust Originals slate, and that consensus continues to significantly underestimate the financial impacts of these dynamics."

As of 1550 GMT, Netflix shares had climbed 6.02% to $287.68 each.