When a stock like Netflix, Inc. (Nasdaq: NFLX) more than doubles in the first six months of the year, it’s often hard to justify buying after the move. However, analysts say Netflix has officially become the “new king of all media,” and NFLX stock is the exception to the rule.
According to Bank of America analyst Nat Schindler, even if Netflix achieves just conservative international penetration levels, the stock could have tremendous additional upside in the long term.
“We think NFLX can become the dominant streaming player in virtually all markets given its content scale, despite varying levels of competition, regulation and economic conditions in each market,” Schindler says.
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He says even after NFLX stock’s huge run, there’s no shortage of additional bullish catalysts ahead, including potential price hikes, margin expansion, 5G wireless network rollouts and the virtually untapped Indian market.
Bank of America is projecting Netflix will reach 360 million global subscribers by 2030, or roughly 54 percent of the total number of global pay TV subscribers it projects for 2021 (excluding China). Of those 360 million subscribers, 280 million will be international and 80 million will be domestic. To hit that number, Schindler says Netflix will need to grow its subscriber base at a compound annual rate of 8 percent over the next 13 years.
Schindler expects Netflix will average a 6 percent compound annual growth rate on pricing in the near future.
“Despite great success growing subscribers, we see continued growth internationally and additional leverage with pricing increases over the next five to 10 years,” he says.
While competition in the streaming video space is certainly heating up, Schindler says Netflix’s unparalleled library of original content differentiates its service from competitors and will help to protect its market share over time. A strong library of original content also adds to Netflix’s pricing power, a key component of its long-term earnings growth trajectory.
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Netflix has taken heat from bears in the past due to its extremely lofty earning multiple, but Schindler projects Netflix will reach $9.79 in earnings per share by 2020, almost $2 per share more than consensus estimates of $7.96.
Bank of America has a “buy” rating and $460 price target for NFLX stock.
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Netflix, Inc. (NFLX) Is the New King of Media originally appeared on usnews.com
