Please ensure Javascript is enabled for purposes of website accessibility

Netflix Has 30% Upside, but It Needs to Fight for Every Subscriber, Says Analyst

By Rich Duprey - May 21, 2021 at 10:57AM

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

Growth in the U.S. is likely going to be a slog.

Netflix (NFLX -0.58%) still has growth ahead of it, but it's not going to come easy and the "gains from here will be grinding," an analyst says.

Still, he maintained an outperform rating on the streaming giant's stock and reiterated a $655 per share price target, which indicates he believes the stock is undervalued by about 30% from where it closed yesterday.

Two smiling women on a couch. One holds a tv remote in her hand.

Image source: Getty Images.

Evercore ISI analyst Mark Mahaney told investors in a research note he surveyed some 1,700 consumers about Netflix and found more than half, or 55%, were "extremely" or "very" satisfied about the service they received from the streamer.

As good as that sounds, it's actually down from the 60% range Netflix typically receives, suggesting it is finding "some softness" in the market. With the seemingly ever-expanding choice viewers now have before them as numerous competing services launched during the pandemic, it's not surprising consumer views of Netflix would tick down.

Based on Sensor Tower data for app downloads, Mahaney thinks Netflix's guidance that it will add only 1 million net new subscribers to its service globally in the second quarter is "reasonable."

It's going to have to duke it out for new subscribers here in the U.S., but growth is not dead, while elsewhere, such as in Japan, the survey indicates Netflix is at "an "inflection in penetration" and satisfaction with the service has "surged."

Overall, he still sees Netflix as a buy and the streaming service stock still has substantial upside to it.

Rich Duprey has no position in any of the stocks mentioned. 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.
$242.70 (-0.58%) $-1.41

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

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.