Netflix Inc. is rapidly becoming the biggest platform for offering original content, online TV screens, feature films, and documentaries. The company is present in more than 50 countries and is planning to expand further to over 200 countries by the end of 2016.
According to the increasing positive sentiments, Netflix target stock price has been increased by Raymond James to $730 from $585 while reiterating an Outperform rating. The sell side firm backed its price target revision because of increase in user adoption of the online services, margin expansion, original content strategy, and enterprise value.
According to the data survey results for June quarter, the firm mentioned that their finding reflects an increase in user retention and also company’s popularity of original content. According to individual survey, 49% respondents said that they like to retain Netflix as their streaming service default, an increase by 41% from previous month survey results. As per the firm, the company’s popularity as a provider of original content is increasing as shown in the survey.
Quoting reviews of IMDB, analysts at Raymond James said that the original contents of Netflix stands on top of its competitors, standing in-line with Showtime. They mentioned that year to date median review for the online streaming site is 8 as compared to record median of 7.3, which reflects that the streaming content quality has enhanced. The analysts also mentioned that however Netflix is not driving as much hits as pay TV players, but it has surpassed broadcast. As per the analysts, this shows that the aim of catering over 60 million subscribers in United States can be easily achieved and there is possibility of increase in price.
The sell side firm is optimistic that the company’s research and development in technologies and big data will allow fast growth for Netflix Inc. across the market and will “maintain high availability amid cloud provider outages”. This will serve as a supportable competitive advantage for the streaming giant, as per Raymond James.
Moreover, analysts at Raymond James wrote that they see weaknesses in the company stock as buying chances. The added, "Netflix’s biggest risk is execution versus expectations as shares trade on sub growth and a quarterly disappointment can cause large declines (e.g. down -19% post 3Q14 results). We prefer to view NFLX on a trailing-two-quarter basis and, noting that trends tend to normalize over this period, view sell-offs as buying opportunities.”
The sell side firm increased its 2015-16 revenue estimates to $6.70 and $8.47 billion, respectively.