Netflix Inc. analysts predict further growth next year for the world's largest paid online TV network after it added more subscribers than expected in the third quarter.
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Netflix: The box office hit set to break records for investors
Netflix Inc. analysts predict further growth next year for the world’s largest paid online TV network after it added more subscribers than expected in the third quarter.
EDINBURGH – Netflix investors have reason to gloat, with the global online TV network expected to keep growing exponentially as it rolls out its strategy for global domination. Netflix results surprised on the upside this week, with analysts raising their share price targets to take into account expected growth in the short-term. According to Investopedia, Netflix streams already account for a third of global bandwidth in peak usage times. Netflix has been spending vast sums on original content, too; so much in fact that its estimated spending for 2018 – in the region of US$13bn- is equal to the gross domestic product of a small country like Albania. Netflix was reportedly born out of its founder's frustration at being hit with a late return fee on a DVD rental and has reinvented the movie- and series-watching landscape. – Jackie Cameron
By Livia Yap
The Netflix Inc. app is displayed for a photograph on a television in Tiskilwa, Illinois, U.S. Photographer: Daniel Acker/Bloomberg
Most of the analysts with a bullish stance raised their share price targets as the 21-year-old company soothed doubts about its global prospects after issuing an upbeat outlook for the current three months with plans to add a record number of customers this year. Keybanc was less optimistic on the upside, noting that margin expansion and investment efficiency aren't exceeding expectations. The stock soared 11 percent in after-hours trading.
Here's what analysts are saying about the results:
Morgan Stanley, Benjamin Swinburne
Netflix is likely to see further growth in 2019 amid its successful expansion into new genres and growth in new geographies, analysts including Swinburne wrote in a report.
The company has "consistently reinvested its near-term success into deepening its competitive moat," which has allowed it to find success in widely diverse markets around the world.
Netflix might add more than 25 million paid global subscribers again in 2019 and could become free cash flow positive in 2021. Morgan Stanley raised the price target to $475 from $450, just a day after cutting it from $480 before the earnings. The broker maintained its overweight rating.
RBC, Mark Mahaney
"Long-term fundamental trends remain very, very, very much intact," Mahaney wrote in a report increasing the price target by $10 to $450, keeping the outperform rating. Netflix is about as close to an "open-ended growth" story as you can find in today's market, he said.
Not only is the company's consumer value proposition "compelling", global subscriber additions and streaming revenue are "accelerating", and it has pricing power and expanding corporate margins, the analyst said.
Cowen, John Blackledge
"Set-top box integrations and bundling deals that are likely aiding in increased uptake among late adopters," analysts led by Blackledge said in a note. He raised the share price target by $30 to $430, keeping his outperform rating.
KeyBanc, Andy Hargreaves
"Improving investment efficiency or significant ancillary opportunities" are required for Netflix's stock to rise meaningfully from current levels, Hargreaves said in a report, cutting recommendation to sector weight from a previous overweight.
While the analysts continue to view Netflix's strategic positioning favorably, they do not see either happening over the next year. Shares could reach fair value at $377, the report said.
Stifel, Scott Devitt
Expects to get more granularity on the company's 2019 expense plans by line item next quarter, while the company will see easier expense comparisons in 2019 given the push toward self-produced content and content-specific marketing ramp-up in 2018.
The broker forecasts steady domestic growth and accelerating international momentum will help attract 29 million clients also next year. It kept its buy rating, raising the price target to $474 from $395.
Source: Bloomberg