Netflix, Inc. (NASDAQ:NFLX) scored $1 billion plus in market cap valuation this week after an impressive fourth quarter showcase, where the video streaming giant trounced Street-wide subscriber expectations. One thing is clear to a bull rooting for Netflix to ‘win’ the game.
BTIG analyst Richard Greenfield said it was just a year and a half ago he had counted on the company’s worldwide streaming subscriber additions to hit roughly 16 million in 2017 and 2018.
Present-day? The company scored around 24 million streaming net adds for last year, leaving the analyst forecasting Netflix to beat out his estimate of 28 million by next year. Within two years’ time, Greenfield bets Netflix can shoot past 200 million subscribers, which is a far rise compared to his previous expectations in October of 2017 calling for 176 million subscribers from the giant.
Therefore, the analyst reiterates a Buy rating on NFLX stock while hiking the price target from $225 to $330, which implies a 25% upside from current levels. (To watch Greenfield’s track record, click here)
Greenfield writes, “While it took Netflix 10 years to reach 100 million streaming subscribers, we expect it to take only 2 1/2 years to reach the next 100 million. The virtuous circle of more subscribers at higher prices is enabling Netflix to invest in more/better content that is attracting more subscribers who are willing to pay more per month.”
“Netflix management clearly sees the opportunity to accelerate subscriber growth by pushing the pedal down far faster on content spend and related marketing efforts, particularly with greater competition coming from the likes of Disney and Apple in 2019. In turn, our substantially higher subscriber totals come at a cost, with adjusted EBITDA and free cash flow lower than previously forecast,” asserts the analyst.
True, the giant is “in aggressive investment mode to grab market share,” which could translate to negative free cash flow of $3.3 billion for this year, wagers Greenfield. As such, “valuing the company has become increasingly challenging.” Yet, there is no question in this analyst’s eyes that Netflix is triumphing, with the reward well worth the risk: “That being said, our confidence in Netflix ‘winning’ is growing given the increasing consumer appeal of their content.”
TipRanks indicates a cautiously optimistic analyst stance circling Netflix stock. Out of 31 analysts polled in the last 3 months, 22 are bullish on Netflix stock, 8 remain sidelined, while 1 is bearish on the stock. With a return potential of nearly 2%, the stock’s consensus target price stands at $266.03.