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Shares of Netflix NFLX popped over 3% through afternoon trading on Tuesday to hit yet another new all-time high on the back of the most bullish analysts call to date. GBH Insights upped its price target to a whopping $500 per share, less than a week after Goldman Sachs GS lifted its target to $490. Therefore, investors clearly need to take a look at why analysts are so excited about the streaming giant.
GBH Insights raised its NFLX price target from $400 per share to $500 on Tuesday, which marked a 28% premium from Monday’s closing price of $390.40. GBH’s updated price target marked the highest out of the 36 analysts who cover Netflix, according to FactSet. Meanwhile, the firm reaffirmed it “highly attractive” rating.
"Our bullish thesis on Netflix is based on our belief that the company's competitive moat, franchise appeal, ability to increase international streaming customers through 2020, and original content build out will translate into robust profitability and growth," analyst Daniel Ives wrote in a note to clients.
Netflix added 7.41 million new members in the first quarter, which marked a 50% jump from the year-ago period and topped the company’s forecast of 6.35 million. The streaming company closed the quarter with 125 million members. Looking forward to the second quarter, Netflix expects to add 6.2 million new members. These user figures and growth estimates are part of the reason analysts are so excited about Netflix.
Last Week, Goldman analysts reiterated the firm’s buy rating for NFLX and upped their price target from $390 per share to $490 per share—the previous Wall Street high—citing the company’s growing content offerings and distribution ecosystem. GBH analysts pointed out similar reasons for their new price target.
Investors will also be pleased to note that a GBH survey claimed that the average Netflix customer watches its service more than 10 hours per week, which tops Amazon AMZN and Hulu’s five hours. GBH also stated that almost 90% of Netflix's subscribers said they would be willing to pay more for the service. This is a good sign for investors since people clearly think that Netflix’s content offerings are already worth the $13.99 a month price tag that it charges for its premium subscription.
Netflix wisely began spending billions of dollars on its own original content when it realized how popular the streaming, commercial-free subscription model had become. The company understood that one day the Disney’s DIS and Fox’s FOXA of the world would pull their movies and shows, or simply ask for too much. The company’s investments will become even more crucial after AT&T’s T $85 billion merger with Time Warner TWX was approved.
Stock Price Movement
Shares of NFLX have skyrocketed 1,108% over the last five years, before today’s climb. Netflix’s movement crushes Amazon’s 520% climb and Facebook’s FB roughly 707% surge.
NFLX has also soared over the last year, up nearly 164% against the S&P 500’s 14% climb. Investors will also see that shares of Netflix have climbed nearly 109% since the start of the year, which places it near the top of the S&P 500.
Lastly, investors will want to see some of the top and bottom line growth estimates that help support the recent string of bullish calls.
Our current Zacks Consensus Estimates are calling for Netflix’s Q2 revenues to surge by 41.26% to reach $3.93 billion. The company’s full-year revenues are expected to climb by nearly 38% to touch $16.12 billion.
At the other end of the income statement, Netflix’s adjusted Q2 earnings are projected to skyrocket from $0.15 per share in the prior-year period to $0.80 per share. For the full-year, the company’s earnings are expected to climb by 130% to touch $2.88 per share.
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