Shares of Netflix (NFLX 7.40%) surged as much as 7.5% on Monday as analyst firm Canaccord Genuity sketched a rosy picture of the company's prospects in 2020. By 3:05 p.m. EDT today, the stock had cooled down slightly to a 7% gain.
Canaccord analyst Michael Graham raised his price target on Netflix from $415 to $450 per share, leaving a buy rating unchanged. Graham argued that the company will benefit from stay-at-home orders during the coronavirus crisis, boosting Canaccord's subscriber-addition estimates by 20% for the first quarter and 5% for the full fiscal year. The accelerated account growth, in turn, should lead to 0.5% higher revenue in the first quarter and a 1% revenue boost for the full year.
We'll see how accurate Graham's short-term estimates were on April 21 when Netflix reports results for the first quarter of 2020. We could discuss the numeric targets all day, but there should be no question about the relative direction of the company's first-quarter results. Revenue and subscriber additions will surely beat management's original guidance, and the paused production of new content should result in lower cash expenses in the second quarter. Canaccord's report set some realistic expectations for next week's business update.