Netflix's (NASDAQ:NFLX) amazing run -- as its shares have more than tripled since bottoming out this past summer -- may not be over yet.
The stock moved 5% higher yesterday after Pacific Crest analyst Andy Hargreaves boosted his price target on the leading video service.
Hargreaves is jacking up his goal to $225 from a now obsolete target of $160.
He's not merely keeping up with the buoyant share price. Hargreaves is also juicing up his expectations for the service's growing magnetism.
The bullish analyst now sees Netflix serving as many as 46 million domestic streaming subscribers by 2021, higher than his earlier forecast of 43 million and well above the 27 million domestic streaming accounts that were on Netflix's rolls when this year began.
There will naturally be heady upside outside of Netflix's home turf. By 2015, Hargreaves sees 17 million international accounts, and that's up sharply from today's 6 million subscribers.
HBO is more of an opportunity than a threat
Hargreaves was on CNBC yesterday to discuss his refreshed optimism.
He was asked about Time Warner's (NYSE:TWX.DL) HBO in light of recent comments by the premium movie channel indicating that it may make HBO Go a stand-alone option through broadband service providers.
"We think that that would be tremendously positive for Netflix, and at the end of the day that's certainly underlining our view here, is that we think there's a paradigm shift," he responded. "Netflix is essentially the best in the world, we think, at executing that model."
As a result of Netflix's value proposition -- face it, $7.99 a month for unlimited access to a growing digital library is pretty cheap -- Hargreaves doesn't have a problem seeing roughly half of the broadband-enabled homes in this country on the platform.
HBO itself will probably have a hard time competing at its substantially higher price, but it's certainly feasible to see consumers moving away from cable and satellite in eight years and cherry-picking their channels and services.
A lot can change in three months
A target price of $225 would've seemed outrageous several months ago.
Coinstar's (NASDAQ:OUTR) Redbox was teaming up with the country's largest wireless carrier to introduce Redbox Instant. Amazon.com (NASDAQ:AMZN) was busy making its own luck by slashing prices on Kindle tablets ahead of the holiday rush, as Amazon Prime subscribers can tap the leading e-tailer's digital vault that way.
It's hard to bet against Netflix these days, and it's not just Hargreaves who's growing more and more upbeat over time.
Just three months ago, the average consensus estimate from the more than two dozen major analysts modeling Netflix was a profit of $0.43 a share this year and $1.41 a share in 2014. Now those bottom-line forecasts are perched at $1.41 a share in 2013 and $2.99 a share come next year.
Hargreaves is naturally reiterating his earlier outperform rating, feeling that healthy overseas growth and natural margin expansion given the scalable model will breathe new life into Netflix's financial future.
Who else can catch up at this point? Nobody has the established Web-tethered subscriber base to justify Netflix's capital outlays for popular or original content. There's also the service's unmatched data mining.
HBO may have been at this game for decades, but what does it really know about its customers? Amazon has been selling DVDs and now video downloads for longer than Netflix, but it doesn't have the data that falls into Netflix's lap as more than a billion hours of streaming video are consumed.
Netflix is less likely to make a content mistake than HBO or Amazon or Coinstar because it knows what consumers are actually streaming.
Why didn't Amazon buy Netflix when it had a chance this summer? When Netflix was unloved and trading for less than a third of the price that it is right now, why didn't Microsoft (NASDAQ:MSFT) buy Netflix?
Microsoft had the money, and Netflix CEO Reed Hastings even sat on its board at the time. It would've improved the software giant's prospects with the poorly received Surface tablet late last year, and served as a cornerstone for the next Xbox. Amazon -- after years of being a rumored suitor -- could've snapped up Netflix at its most vulnerable and affordable moment.
It's too late now. Everybody's chasing Netflix higher these days.