Netflix, Inc. (NASDAQ:NFLX) stock took a hit after the company reported less-than-expected new subscription additions in July. But several analysts believe the stock should be bought as the company has a huge growth potential.
On Monday, Netflix stock surged after Moffett Nathanson analyst Craig Moffett said in a report that Comcast will have a lot of difficulties in competing with Netflix even after acquiring U.K.’s Sky PLC.
Analysts expect Netflix, Inc. (NASDAQ:NFLX) to earn about $15.85 billion in sales this year, while the company is also estimated to spend a whopping $8 billion, or roughly 50% of revenue, on new content this year. Analysts believe that this huge spending will do nothing but grow the streaming company’s subscriber base and success factor. Increased spending will also help Netflix beat the lofty targets and Wall Street’s expectations. Last quarter, Netflix, Inc. (NASDAQ: NFLX) added 670,000 domestic subscribers, below that the Street’s forecast of 1.2 million. International subscriptions totaled to 4.47 million, missing the 5 million mark.
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Guggenheim Partners analyst Michael Morris increased his price target for Netflix to $420. The analysts believes that Netflix’s subscribers will “significantly exceed”. He thinks Netflix business model is efficient, and it will continue to support a “virtuous cycle” of quality content creation, distribution, and monetization.
Morris also predicted that Netflix’s subscriber base will more than double by 2023, crossing the 285 million mark.
Perhaps the biggest long-term growth catalyst for Netflix is the company’s massive potential in India. Morris said that India remains a strong market for Netflix because the country’s broadband infrastructure is improving, while the upper-middle class is gaining more and more access to smartphone devices. These factors will increase the user base of Netflix in India. Morris said Netflix will have about 5.5 million subscribers in India by 2021.
Netflix CEO Reed Hastings recently said that Netflix sees its next 100 million subscriber coming from India.
In August, investment firm SunTrust upgraded Netflix to “Buy” from “Hold”. SunTrust’s analyst Matthew Thornton advised investors to buy the stock amid reports of huge success of a new series named “resonating quite well” in India.
Earlier this month, it was also revealed that Netflix, Inc. (NASDAQ: NFLX) content will be getting started on Sky’s (OTCQX:SKYAY) service in November. The service, known as Ultimate on Demand, will be priced at £10 a month for all new and existing customers alongside the Sky Q subscription. This initiative will grow Netflix’s user base in the U.K. as well.
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Author does not have investment in stock discussed in this article.