RBC Capital analyst Steven Cahall is out with a research report on shares of Netflix, Inc. (NASDAQ:NFLX), providing an analysis of Netflix against the rest of the pool of U.S. Media Networks leaders, from subscriber/user growth and engagement to monetization to profitability.
Cahall’s intent was to analyze which platform comes out on top and which falls below when it comes to dynamics of growth and monetization, with special attention to revenue and EBITDA per subscriber and per viewing hour. In light of the findings, the analyst reiterates a Buy rating on shares of NFLX without listing a price target.
Cahall notes, “Our conclusions for NFLX will likely come across as highly controversial, given that Netflix has just reported two straight quarters of Subscriber guidance and estimates misses.”
First, Cahall recognizes significant upside potential from NFLX’s 47MM U.S. streaming subscriptions, explaining, “[…] if NFLX’s value proposition continues to build out, the average media network household penetration levels suggest much higher long-term Netflix subscriber levels.”
Second, Cahall believes the online streaming giant showcases a dramatic gap in monetization between other big media network names, gaining half the revenue per viewership hour when up against AMC, CBS, Fox News, Discovery, CNN, Comedy Central, and Nickelodeon. The analyst gleans from this that “Netflix may have much more value/price power.”
Especially considering “consistently greater engagement by Netflix” outperforming the same major media network names, to Cahall, this means the giant has a real chance for monetization to see a major boost.
Third, “Were Netflix to over time close both the Household and the Profitability gap between it and most key media networks […] it could experience dramatic growth in its U.S. profitability.”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Steven Cahall is ranked #3,459 out of 4,151 analysts. Cahall has a 35% success rating and faces a loss of 4.8% in his annual returns.
TipRanks analytics indicate NFLX as a Buy. Based on 32 analysts polled in the last 3 months, 17 rate a Buy on NFLX, 9 maintain a Hold, while 6 issue a Sell. The 12-month average price target stands at $111.24, marking a nearly 15% upside from where the shares last closed.