RBC Capital’s Mark Mahaney Predicts 160 Million Plus Subscribers for Netflix, Inc. (NFLX) By 2020


RBC Capital analyst Mark Mahaney is out with a confident research report on Netflix, Inc. (NASDAQ:NFLX) after assessing results from his U.S. survey to be “unambiguously positive” with results in Japan marking “The Land Of The (Slowly) Rising Sub” in a tough market.

Therefore, taking into account his assessment of “Neflix’s Merchandising opportunity” coupled with a revised Global Broadband Penetration analysis, the analyst reiterates an Outperform rating on NFLX with a price target of $175, which represents a just under 22% increase from where the shares last closed.

When glimpsing into success in the U.S., the analyst’s survey reveals “record usage levels” with 55% using Netflix to watch movies and television shows, trouncing big competitors like YouTube with 46% and Amazon with 31%, as well as “record-high satisfaction,” with 72% of subscribers notably either “Extremely” or “Very Satisfied” with the service, “[…] matching the highest level we’ve ever tracked over the last five years,” says Mahaney. Also encouraging, the online video streaming giant’s “churn challenge appears to be abating,” with 73% of subscribers asserting they are “Not At All Likely” as a risk for subscription cancelations in the forthcoming 3 months. As original content continues to escalate in clout as far as securing subscribers, the analyst cheers these as the best U.S. survey results over the past 5 years.

Though Japan presents a more “challenging market,” penetration is slowly but surely on the rise, with Mahaney underscoring, “Although NFLX’s Japan ramp has been slow, we still see the company on path to 10% broadband penetration within 3 years.”

When looking into merchandising, the analyst views opportunities such as Stranger Things t-shirts at Hot Topic as both reasonable as well as compelling, adding, “We see this as a potential stand-alone Billion Dollar Revenue Opportunity (BDRO) in the long-long-term, following the examples of Disney and Time Warner.”

“We believe NFLX can amass 160MM+ subs by 2020. If this is accurate, we see NFLX generating $8-$10 in EPS by 2020. We believe that a secular growth, high-visibility subscription model would carry a premium P/E multiple of at least 20x, implying a $200+ stock price by 2019,” Mahaney concludes.

Mark Mahaney has a very good TipRanks score with a 73% success rate and a high ranking of #7 out of 4,501 analysts. Additionally, Mahaney yields 21.3% in his annual returns. When recommending NFLX, Mahaney realizes 5.3% in average profits on the stock.

TipRanks analytics exhibit NFLX as a Buy. Based on 35 analysts polled by TipRanks in the last 3 months, 21 rate a Buy on Netflix stock, 12 maintain a Hold, while 2 issue a Sell. The 12-month average price target stands at $150.90, marking a 5% upside from where the stock is currently trading.

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