There's a new Netflix (NFLX +1.13%) bull in town. UBS analyst Doug Mitchelson upgraded Netflix stock, going from hold to buy on Monday. He feels that Netflix's subscriber guidance for the current quarter may prove conservative given the momentum that the platform is experiencing through Europe and Latin America. He also sees improvements in Japan.
Mitchelson is now targeting 4.1 million international net additions for the quarter that ends later this month. Netflix's own guidance calls for a gain of 3.7 million in its international accounts. Netflix's outlook also called for 1.5 million net additions in domestic memberships, but the analyst's enthusiasm centers on its international surge.
Netflix expects to end this month with 99 million subscribers, and the trajectory would suggest that it tops the magical 100 million member mark at some point in April. How delirious would the market get if Netflix crosses the nine-figure mark later this month? The extra 400,000 international accounts that Mitchelson is now modeling isn't enough, as it's barely half of the surprise necessary to get to the nice round benchmark. However, given Netflix's history of underestimating its own popularity -- outside of rare exceptions including when its fell short of its own guidance during the second quarter of last year -- closing out the quarter with more than 100 million subscribers is a reasonable possibility.
Image source: Netflix.
New price, same stock
Mitchelson at UBS isn't just upgrading his rating on the stock. He is jacking up his price target from $136 to $175. Hitting $175 would mean that Netflix's market cap would hit $75 billion.
There's no shortage of streaming options these days. It seems as if every few weeks a new platform springs to life. Have you checked out YouTube TV yet? Mitchelson feels that the game -- specifically in the U.S., U.K., and Canada -- is over. Netflix has won, and its market leadership is secure.
Netflix nailing down 100 million subscribers sooner rather than later would be a pretty big deal, and momentum is on its side. The dot-com darling has topped its own forecast by at least 1 million subscribers in back-to-back quarters. Stretching that streak to three periods would translate into crossing the nine figures later this month. This is not too shabby for a company that had 93.8 million at the end of September and written off as dead several years ago.
Getting to $175 won't be easy. There are valuation concerns. However, Netflix has a history of climbing the wall of worry when it comes to competitors, escalating content costs, and its own rich valuation multiples. It's been here before, but if it gets to 100 million subscribers in the coming weeks, it will somewhere that it -- and any other premium streaming platform -- has never been before.
