Shares of Netflix, Inc (NASDAQ:NFLX) tagged a fresh intraday high of $98.25 in early morning trading on Thursday after William Blair’s Ralph Schackart raised his rating on the video streaming giant to ‘Outperform’ from ‘Market Perform’, writing that he sees upside potential of roughly 50% and a favorable long-term risk/reward for the stock. Further, the analyst laid out a bullish NFLX case for $185 a share come 2020, and a bearish case for $110-saying that despite concerns about domestic subscribers in the recent quarter, he believes that Netflix “will benefit as its 70 million-plus audience of nonpaying, often younger users transition to ages at which they become more likely to pay for Netflix.”
According to Schackart, if the company converts 3% of its 72 million audience to new subscribers, the estimates are for an addition of 5.3 million subs by fiscal 2020 as a result of this aging affect alone. Furthermore, the analyst points out that based on survey of viewership trends, Netflix could increase its domestic subscription revenue from streaming by roughly 40%-60% if password sharing were curbed. Given Netflix’s 70% penetration in the Over-The-Top content market, the company could add over 12 million domestic subscriptions, Schackart contended.
Additionally, Cantor Fitzgerald reiterated its ‘Buy’ rating and $120 price target on Netflix in a note released this morning, saying that the Rio Olympics ratings, which were down 9% over the London 2012 games across all platforms, may imply less headwind than previously expected for Netflix in Q3.
Netflix’s upgrades came just as the stock closed above the $95 level yesterday. Should the stock continue to hit higher highs, more rounds of upgrades and price-target hikes may be in the cards.
With nearly $8 billion in annual revenue, Netflix has a market cap of $42 billion, and a stock trading at 110 times its forward price/earnings ratio.
At the time of this writing, NFLX is indicated +2.76% at $97.80 and now stands more than 22% higher off its 52-week lows near $80. At the $98 price-per-share next resistance is at $99.11 ; major resistance is at $100. A break above this key level could portend further technical upside for the stock, while a break below support at $95 could lead sink the stock toward the $90 zone.
Netflix shares have advanced 4.12% in the last 4 weeks while declining 5.01% in the past three months. Over the past 5 trading sessions the stock has lost 1.23%. The Los Gatos, California-based company has a median Street price target of $110.00 with a high target of $185.
Shares are down 14.5% year-over-year, compared with a 16.48% gain in the S&P 500.
Of the 37 analysts who follow the stock, 19 rate NFLX shares a ‘Buy’, 14 recommend ‘Hold’, whereas the rest suggest a Sell rating. The 12-month consensus price target on the name is $120.