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Shares of Netflix (NASDAQ: NFLX ) rose 3% on Wednesday to keep the strong start to 2013 alive. The stock has just about doubled in the new year, helped by a terrific earnings report and several significant content deals.
Today, an analyst poured some more kerosene on the fire. J.P. Morgan analyst Doug Anmuth restated his "outperform" rating on Netflix, boosting target prices from $180 to $205.
Anmuth based the new target on discussions with CEO Reed Hastings and content chief Ted Sarandos. They told the analyst that House of Cards is the most-watched content on Netflix right now. This proves the value of producing an original series in-house, and Anmuth expects the strategy to drive strong subscriber growth in 2013.
"Importantly, we believe the value of House of Cards, and potentially other original content, is likely to increase over time as more members view the content in subsequent years," Anmuth said.
This effect is similar to the residual value in high-quality shows from other producers. For example, AMC Networks (NASDAQ: AMCX ) gives Netflix the right to stream past seasons of award-winning shows such as The Walking Dead, Mad Men, and Breaking Bad.
Rather than undermining the syndication value of these shows, AMC breaks records with every season premiere in the Netflix era, and Netflix reports that first-season episodes find large numbers of new fans all the time.
So the Netflix model of offering entire seasons all at once seems to create business value. House of Cards simply tapped into the trend Netflix already found in other seasonal shows.
The precipitous drop in Netflix shares since the summer of 2011 caused many shareholders to lose hope. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.