Please ensure Javascript is enabled for purposes of website accessibility

Is Netflix a $525 Stock?

By Danny Vena – Jun 16, 2020 at 12:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Even after a rise of more than 30% so far this year, the streaming giant may still have gas in the tank.

Netflix (NFLX -1.03%) has been one of the undisputed beneficiaries of the widespread stay-at-home orders issued in response to the COVID-19 pandemic. Forced into government-imposed lockdowns, consumers caught up on their favorite shows, causing Netflix subscriptions to spike. While some investors worry that the easing of coronavirus-related restrictions could cause increased viewer defections, one analyst thinks there's more gains to come.

Bank of America Merrill Lynch analyst Nat Schindler reiterated his buy rating on the streaming leader with a price target of $525 -- more than 23% higher than Monday's closing price. With sporting events, movie premiers, concerts, and other big events largely in limbo, Schindler argues that Netflix's subscriber growth will remain strong in the coming months. 

A woman with bare feet sitting on a couch looking at streaming video options on a laptop.

Image source: Getty Images.

Netflix churn edged higher last month, with an estimated 2.7% of subscribers canceling in May, up from 2.4% in April, but this is a modest increase in churn that Schindler chalks up to seasonality, and "not indicating a cancellation wave from ending lockdowns or recession." Indeed, the churn rate clocked in at 2.9% in 2019 and 2.6% in 2018, giving credence to the assertion.

During the first quarter, Netflix added a record 15.8 million subscribers, up 23% year over year. Domestic growth, which had stagnated in recent years, also increased 23%, while growing more than four-fold quarter over quarter. 

Even after such significant subscriber gains, internet search data reveals that viewers aren't researching for a way to cancel their Netflix subscriptions, which suggests that users are planning to stick with the streaming technology leader, even as pandemic-related lock-downs are being lifted.

 

Danny Vena owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$224.07 (-1.03%) $-2.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.