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Analysts Are Feeling Strong About Netflix’s Future

Streaming content giant Netflix saw its shares pop after getting some bullish remarks from Citigroup. According to the firm, investors should be buying Netflix on the big dip.

Shares of Netflix had falling in the week, falling almost 12% as the tech sector continued to sell off.

Citi has said that Netflix is a “high-quality, recurring revenue franchise with attractive upside potential.” The firm has reiterated a $375 price target and has boosted its rating from “neutral” to “buy” on the stock.

“We view the recent sell-off as an opportunity to own a high-quality, recurring revenue franchise with attractive upside potential,” Citi analysts stated. The firm believes that “fundamentals remain strong… and the opportunity to continue growing international subs and to exert pricing power leverage remain, in our view.”

Citibank analyst Kevin Toomey has noted that current forecasts call for Netflix streaming growth of 700,000 domestically and 4.75 million internationally in the third quarter. He now expects management to likely forecast the numbers respectively to 1.65 million and 5.75 million for the fourth quarter.

Recently analysts at Credit Suisse, the slate in the year ahead “is shaping up to be meaningfully stronger than 2018.”

Analyst Douglas Mitchelson has said, “This bodes well for 2019 subscriber growth as scaling quality content should benefit both marketing and churn.”

“Netflix’s original content slate in 2019 could prove substantially larger and more impactful to marketing to new potential subscribers and increasing subscriber satisfaction (and thus, lowering churn) than it has been in 2018,” he wrote. He also said this is “increasing our confidence in a favorable growth outlook for Netflix.”

Mitchelson has an “outperform” rating on the stock and a $470 price target.

Goldman Sachs analyst Heath Terry has raised his price target on Netflix to $470 as well and has written in a note to clients, “We believe subscriber growth … will drive financial results well above consensus estimates and should continue to drive stock price outperformance.”

Terry has three reasons why he thinks investors are underestimating Netflix’s potential. One is mobile domination. He wrote, “While in-home television remains the primary medium by which people consume longer-form video content, smartphone penetration is on the verge of reaching near global ubiquity, data costs are declining rapidly, and viewing habits are shifting to mobile out of home.”

The other is more content equals more subscribers. “New shows and movies drive gross subscriber additions, and the breadth of the library reduces churn,” Terry wrote. “We believe acceleration in spend into next year should drive subscriber growth above consensus.”

Last, he believes it is greater than the sum of its parts. “Anecdotal and quantitative evidence suggest that Netflix’s scale, distribution and data advantage, and the flexibility of the medium compared to ad-supported channels, is driving higher quality, [and] more popular content per dollar spent,” Terry wrote. “We believe these advantages compound.”

Shares of Netflix have been seeing big gains in 2018 so far, with it up roughly 67%. The company will be reporting third quarter earnings on Tuesday, October 16th.

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