Close

Netflix (NFLX) Initiated with 'Buy' at Canaccord Genuity on Forecast for Strong Long Term Subscriber Growth

July 1, 2016 7:45 AM EDT
Get Alerts NFLX Hot Sheet
Price: $618.39 +2.06%

Rating Summary:
    43 Buy, 27 Hold, 4 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
Join SI Premium – FREE

(Updated - July 1, 2016 10:15 AM EDT)

Canaccord Genuity initiated coverage on Netflix (NASDAQ: NFLX) with a Buy rating and a price target of $120. Analyst Michael Graham noted that subscriber growth is the key driver, and he is bullish long-term on international subs and more moderately constructive on domestic subs. In the short term, thinks temporary headwinds may keep growth muted.

The analyst explained, "Netflix stock is down over 30% from highs above $130 reached last December. Much of this was due to sluggish international subscriber guidance for Q2 (2M net adds vs 3M consensus), and we think Q3 may also bring more modest growth given tougher comps and a few temporary headwinds. That said, our analysis suggests a long runway for international sub growth in Q4 and beyond, and we believe this is the key metric for the stock through next year at least," said Graham.

Graham said his deep dive analysis of Netflix’s international markets suggests the company can achieve 85% and 84% of his 2020 and 2025 int'l subscriber forecast simply by focusing on the wealthiest households in the 13 countries with the most TV households.

"With vast potential in the other 179 markets and the potential to move from a top-of-market skim product to more of a mass-market product internationally, we see a long runway for growth. That said, weaker guidance for Q2 underscores some potential near-term headwinds, including tougher comps due to 2015 market launches, price-hike un grandfathering, summer seasonality, and the Rio Olympics," Graham continued.

Discussing the competitive landscape, Canaccord said, "We detail the competitive landscape in the U.S. and the 13 large countries and believe Netflix faces only moderate threats. In the U.S., competitive offerings will proliferate, but in a new un-bundled OTT world (and with help from possible set-top box integrations), Netflix should move from being a substitute good to a complementary good relative to cable, and this should foster continued growth domestically."

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $91.48 yesterday.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Analyst Comments, Hot Comments, Hot New Coverage, New Coverage

Related Entities

Canaccord Genuity