Netflix (NASDAQ:NFLX) jumped out of the gate this morning and has kept moving higher throughout the trading session, rising almost 6%, or $10.50 per share, as of 1:45 p.m. EDT. This comes after analysts at Pacific Crest Securities gave a bullish outlook for the video-streaming giant, boosting its price target on the stock from $160 to $225.
Pacific Crest's analysis echoes the bullish sentiment that many investors have long believed about Netflix. Although most investors have focused on Netflix's domestic business, its international expansion prospects are even larger, and Pacific Crest believes its overseas business could account for nearly a third of total Netflix subscribers by 2015.
That doesn't mean Netflix will reap this success without effort. Competitors are lining up to threaten the company's business model. Amazon.com (NASDAQ:AMZN) seeks to use the power of its Amazon Prime customer base to drive demand for its own streaming content. The company has traditionally been willing to accept razor-thin margins or even short-term losses in the early stages of a budding new technology in order to build up a strong position in the industry, and that can have negative effects on the companies it's competing against. But Netflix CEO Reed Hastings is quite familiar with Amazon's tactics, and the company has also done a better-than-expected job of holding onto its DVD subscribers even after threatening to jettison them in its ill-fated strategic shift back in 2011. That, in turn, has held Coinstar (NASDAQ:OUTR) and its Redbox service back, allowing Netflix to keep more profit for itself.
The key to continuing success for Netflix remains obtaining content that people want to see and are willing to pay for. With its recent deal with Disney (NYSE:DIS), Netflix unlocked the door to a vast reservoir of high-value content, and that value will only grow as Disney's recent acquisition of Lucasfilm adds to its established stable of potential blockbusters from Pixar and Marvel. Moreover, Netflix's own foray into content creation with its House of Cards series could prove to be the next step in the company's evolution and help it keep costs down while maintaining high quality.
As long as Netflix keeps growing, its share price has the capacity to follow suit. Even with the massive run in its stock, a further 15% to 20% increase to $225 per share doesn't look out of the question for Netflix in the near future.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Amazon.com, Netflix, and Walt Disney. The Motley Fool owns shares of Amazon.com, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.