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Shares of the maker of "House of Cards" and "Orange is the New
Black" traded up 10.2 percent at $108.11 before the market on
Thursday, after the company reported its global subscriber base
had grown to more than 65 million, beating its own forecast.
"Netflix is accelerating away from (the) competition," said
Pacific Crest analysts, who rate the stock "overweight" with a
price target of $122, compared with Wednesday's close of $98.13.
The pace of new subscriber sign-ups almost doubled to 3.3
million in the second quarter, driven by a strong slate of
original content, such as "Sense8" and "Daredevil", and
Netflix's launch in Australia and New Zealand.
At least 10 brokerages raised their price target on the stock.
Pivotal Research was the most bullish with a price target of
$155 - about 58 percent higher than the stock's Wednesday close.
The median price target on the stock is $103.57.
Netflix is aggressively expanding into new markets and plans to
reach almost every country in the world by the end of next year.
Next up is Japan this quarter, with Spain, Italy and Portugal to
follow later in the year.
The company said it expects to sign up 5-6 million subscribers
this year and next, but many analysts saw that as too
conservative -- even though it has yet to work out how to crack
the Chinese market.
Cowen and Co analysts forecast global subscriber numbers of
nearly 174 million by 2020. Pivotal Research analysts see
Netflix topping 200 million users by 2021.
"Our thesis borrows from Sinatra: if they could make it here (in
the US – the most competitive market), they could make it
anywhere," said Nomura's Kevin Rippey, who has a "buy" rating on
the stock.
Borrowing a baseball analogy, RBC Capital Markets analyst Mark
Mahaney said accelerating subscriber additions suggest "we're
only in the 4th or 5th inning."
Mahaney, who rates the stock "outperform" and raised his price
target to $125 from $100, also pointed to rising U.S. gross
margins as an important positive for Netflix.
Netflix, which has over 42 million subscribers in the United
States, said it added 2.4 million international subscribers and
900,000 U.S. subscribers during the second quarter.
Of 42 analysts covering the stock, 23 rate the stock "buy" or
its equivalent rating, 15 rate it "hold," and 4 rate it a "sell"
or equivalent rating, according to Thomson Reuters data.
(Reporting by Tenzin Pema and Lehar Maan in Bengaluru)
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