Netflix Is a Dot-Com Darling Again

The good times continue at Netflix (NAS: NFLX) .

Shares of the leading premium video service provider opened 7% higher today after an upgrade from Morgan Stanley analyst Scott Devitt.

Devitt's boosting his rating on the shares -- from equal weight to overweight -- and setting an $85 price target that suggests 28% in upside off of Friday's close.

Devitt is the latest analyst to argue that Netflix is too cheap given the quality of its growing domestic business. Citigroup analyst Mark Mahaney may have gotten that ball rolling earlier this summer, issuing a bullish note arguing that Netflix was trading for just 12 times the profitability of its domestic operations.

Too many naysayers harp on Netflix's spotty profitability, glossing over the fact that losses incurred in its breakneck international expansion are currently eating into stateside earnings. Netflix is very profitable with its growing streaming business domestically. Subscribers are cancelling the more lucrative DVD-based service, but we're still looking at a company that closed out its latest quarter with more than 30 million subscribers.

Devitt's also not concerned about the competition. He feels that (NAS: AMZN) is unlikely to launch Prime Instant Video as a stand-alone service, keeping it in its current form as merely a perk for Amazon Prime loyalty shopping customers. He doesn't feel that Amazon would be open to shelling out an extra $1 billion to $1.2 billion annually to close the content gap with Netflix.

Besides, Netflix has a funny way of swatting away the competition. DISH Network's (NAS: DISH) Blockbuster and Coinstar's (NAS: CSTR) Redbox were its biggest threats when the company was primarily shipping out DVD rentals, but neither rival followed Netflix into streaming.

Redbox is still talking about a rollout later this year, and Blockbuster's limited streaming platform rolled out last year but only for DISH satellite television customers.

It's been a great October for Netflix so far, and that's something that it couldn't say last year when its stock took a 28% pounding. The stock popped 22% higher last week as one of the market's biggest winners, and it's off to a strong start this week, too.

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