Netflix, Inc. (ticker: NFLX) has increased its market capitalization by more than tenfold in the past five years by delivering incredible revenue growth and impressive returns for investors. And according to new projections from a Rosenblatt analyst, Netflix still has plenty of growth ahead.
In a new research note, Rosenblatt analyst Alan Gould says the Netflix growth story will continue for at least another eight years. The company’s recipe of investing in original content and expanding to high-growth international markets like China and India means Netflix is nowhere close to its full potential.
Gould says Netflix has found a winning long-term strategy.
“It has the largest global subscriber base, allowing it to be the lowest-cost provider on a per-subscriber basis. Furthermore, it has minimal distribution costs, and as NFLX produces more of its own content, it becomes producer, distributor and retailer, allowing it to maximize profit,” Gould says.
Just last week, Netflix announced it will begin expanding into the massive Chinese market via a new partnership with China’s largest streaming video content provider, iQIYI.
[See: The 10 Best Ways to Buy Tech Stocks.]
The new iQIYI deal came as a bit of a surprise, considering the company told shareholders China “has become challenging” as recently as last October. Western streaming platforms Netflix, Facebook ( FB) and Alphabet ( GOOG, GOOGL) streaming site YouTube are all banned in China by the government.
Now that the iQIYI deal is in place, Netflix’s growth trajectory leads to some impressive long-term projections.
According to Rosenblatt, Netflix investors can expect the company to more than quadruple its annual revenue from around $9 billion to $40 billion by 2025. By that time, Rosenblatt estimates Netflix will have 240 million global subscribers and will be generating $12 per share of income. In the first quarter of 2017, Netflix reported 98.75 million global subscribers. Even eight years from now, the firm predicts Netflix will still be growing income at compound annual growth rate of nearly 20 percent.
For any other company, those projections might sound absurd. However, Netflix has consistently delivered revenue growth in the 28 percent range over the past four quarters and is showing no signs of slowing down.
[See: 7 of the Best Stocks to Buy for 2017.]
But while Netflix offers long-term investors a tremendous growth opportunity, it comes at a steep price. Netflix currently trades at an extremely high forward price-earnings ratio of 80.4, and Rosenblatt says the stock is “appropriately valued” at its current price of around $155 per share.
More from U.S. News
9 of the Market’s Best Growth Stocks
13 Stocks to Buy to Bet on China
8 Tech Funds to Buy to Invest in the Future
Netflix, Inc. Is Marching to 240 Million Subscribers (NFLX) originally appeared on usnews.com
