Netflix (NASDAQ:NFLX) finally landed on the radar of
Barclays, and the Wall Street firm has nothing but high hopes for the media
company in the near-term.
Barclays initiated coverage on Netflix with an overweight
rating, setting a price target of $245 for the company’s shares, which implies
a 15 percent upside to the stock’s January 10 close.
In a note to clients, analyst Kannan Venkateshwar wrote
that Netflix is capable of turning into a media giant, as long as subscriber
growth outpaces content cost growth over time.
This view is supported by the company’s reach worldwide,
its access to about 550 million subscribers, an increasing content library as
well as strong pricing power, the analyst said.
Netflix’s streaming service already has about 5,800
titles and it still plans to invest up to $12 billion for content in 2018. The
analyst also expects yearly sales from the company to increase 27 percent
through 2019 from 2016.
“In our opinion, in the next 3-5 years Netflix is
likely to become the second biggest media company by revenue (ignoring studios
and theme parks), next only to Disney,” Venkateshwar wrote.
The report also found a “very high correlation”
between Google search data on Netflix and the company’s subscriber growth in
the U.S. Google Trends data for “Netflix” in one quarter, for
instance, tended to influence subscriber numbers for the next three-month
It is a different case, however, for international search
data. According to the report, this discrepancy is tied with the company’s
foreign audience being at an “early stage” in development, although
this is projected to develop over time as the subscriber base expands.
Cramer Weighs In
TheStreet’s Jim Cramer described Barclays report on
Netflix as “remarkable” but that it was late to the story on the
“Netflix is one of the top 10 most heavily shorted
stocks. … The piece itself is saying that Netflix has changed the game, but I
would tell you that Netflix is bigger than everyone but Disney,” Cramer
said during an interview with TheStreet.
Netflix will release its fiscal fourth quarter earnings
report on January 22, and analysts on average expect the company to post
earnings of 42 cents per share.
In its third quarter, Netflix reported net earnings of
$130 million, or 29 cents per share.
The company ended the latest trading session up by about
2 percent at $217.24 per share.