William Blair analyst Ralph Schackart offers a bullish take on Netflix, Inc. (NASDAQ:NFLX) after adding the online streaming giant’s addition to the 246th Current Better Values List. For context, the Current Better Values List consists of 10 stocks with a superior investment performance for the 24 month horizon and has been published twice per month for over 35 years.
In reaction, Schackart reiterates an Outperform rating on shares of NFLX with a valuation base case suggestion for the mid-$140s to a bull case of $185, which represents an approximately 8% to 42% increase from where the stock is currently trading.
The analyst sees clear skies ahead for Netflix, elaborating, “Through our research, we believe that Netflix has a meaningful leg up on original programming within the over-the-top (OTT) streaming environment and suggest that these advantages might be underappreciated by investors. Moreover, contrary to some, we believe OTT streaming still has plenty of room to grow both domestically and internationally, and Netflix is well positioned to benefit from this secular growth.”
Optimistic on the giant’s future, the analyst sees a long-term penetration opportunity circling 90% in the U.S. and confidently adds the giant to the list with a forecast for Netflix to outclass the market throughout the next two years.
Schackart breaks down his rationale for NFLX’s selection to the Current Better Values list into three key reasons:
First, the analyst expects future milestones are within NFLX’s scope this year, particularly highlighting, “In 2017, we project Netflix to top 100 million global streaming subscriptions. Moreover, we estimate international to account for more than half the total number of streaming subscriptions for the first time in the company’s history. We believe this could be a key signal that Netflix’s content and market strategy is working.”
Second, Schackart predicts an increase in “material global profits” for 2017, affirming, “We project the international streaming segment to flip contribution margin positive for the first time since the company began reporting the number.”
Third, the analyst concludes that NFLX is “cycling a favorable comp year,” considering 2016 was wrought with tension from price hikes to competition from events like the Olympics and the U.S. Presidential election. Upside potential could be very well within Netflix’s reach, from Schackart’s standpoint.
According to TipRanks, which measures analysts’ and bloggers success based on how their calls perform, four-star analyst Ralph Schackart is ranked #559 out of 4,351 Analysts. With a success rate of 61%, he garners an average annual return of 11.1%. When suggesting NFLX, Schackart gains an average profit of 20.5%.
TipRanks analytics indicate Netflix as a Buy. Out of 35 analysts polled in the last three months, 19 are bullish on Netflix, 12 indicate a Hold rating, and 4 recommend to Sell. With a downside potential of nearly 2%, the stock’s consensus target price stands at $128.11.