Barclays and Its Bull Case for Netflix, Inc. (NASDAQ:NFLX)

Netflix, Inc. (NASDAQ:NFLX) finally landed on the radar of Barclays, and the firm has nothing but high hopes for the media company for the near-future.

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 10th, close. In a note to clients, analyst Kannan Venkateshwar wrote that Netflix is capable of turning into a media giant, as long as content expense growth is outpaced by subscriber 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 by 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 period.  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.com Jim Cramer described Barclays report on Netflix as “remarkable” but that it was late to the story on the streaming service.

“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.com.

Netflix will release its fiscal fourth quarter earnings report on January 22nd, 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.

Free books, reports and subscriptions...