Netflix (NFLX) Price Target Raised to Street-High of $175 at Pivotal Research
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Pivotal Research maintained a Buy rating on Netflix (NASDAQ: NFLX) and raised its price target to a Street-high of $175.00 (from $155.00). Analyst Jeffrey Wlodarczak remains bullish and said the change reflects a shifts to a 2016 price target from 2015.
Wlodarczak explained, "We raised our NFLX target price from $155 to $175 based primarily on a move from a YE’15 to YE’16 target. We left our operational and financial forecasts essentially unchanged. The last three quarterly U.S. subscriber results provide strong evidence that the long term penetration opportunity in NFLX’s original markets may be materially higher than consensus expectations. This also bodes well for the long-term penetration potential within NFLX developing and future markets, which have also delivered materially better than expected results the last 3 quarters."
"In the U.S. we continue to forecast that NFLX reaches 70M subscribers (or 55% of its target market) and 125M internationally (or very roughly 10-15% of its target market) by 2021. We highlight that as NFLX adds compelling (mostly original) content while maintaining the current pricing structure they are effectively driving the perceived price down for consumers for an entertainment experience that continues to improve. Also NFLX appears to operate in a virtuous circle, as the larger they grow the more they can spend on original content, which increases the potential target market for their service, boosted by continued material increases in broadband availability and speeds globally. Recall, we conservatively assume limited price increases and an ultimate ~25% EBITDA margin (as investment in expanding content slows and skews towards original programming + scale efficiencies) = $8 in EPS by 2021," added the analyst.
Shares of Netflix closed at $126.45 yesterday.
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