Solid results reported by video streaming giant Netflix (NFLX) are keeping investors interested in the shares, as is a potential stock split being promised by CEO Reed Hastings.
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Many analysts rushed to raise their price targets on the stock this morning including JP Morgan, Janney, Stifel and FBR Capital, which predicts the stock can hit $900 a share.
FBR Analyst Barton Crockett said: “Our proprietary survey work, in collaboration with ClearVoice Research, LLC, suggests that Netflix users value the service more than traditional pay TV." He also notes the $8-per-month service is "launching 320 hours of new original content, more than any other major video service” this year.
Netlix reported it added a record 4.9 million new members globally in Q1, against its forecast of 4.1 million and prior year of 4 million, bringing its total global streaming membership to 62.3 million.
In the US, it gained 2.3 million new members, well above its expectation of 1.8 million due to both acquiring and retaining more members than forecast. And internationally, the company added 2.6 million members versus a forecast of 2.25 million due to stronger growth than expected across a number of markets.
In a note, Tony Wible at Janney said he “believes NFLX has the potential to add over 50 million US subs and near 100 million international subs over the next decade," making it one the largest content networks on the planet. Although earnings growth will be subsided in the foreseeable future, Wible thinks investors will increasingly look past this and value the company on its longer term growth potential. He raised his price target on Netflix shares to $600 and it remains a Top Pick.
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Netflix added that its international segment was fueled by continued strong growth across 50+ countries as well as a successful March 24 launch in Australia and New Zealand, which adds about 8 million broadband households to our addressable market. Netflix expects international 2Q net adds of 1.90 million, up 70% vs. last year.
“The company appears to be reaping the benefits of a strong content slate in 2015 through improved retention rates in the U.S. and healthy subscriber growth internationally,” said equity analyst Scott Devitt at Stifel. He expects Netflix's subscriber momentum to continue given a strong summer content cycle and more international launches in the second half of the year. He keeps his buy rating and raises the price target to $650.
Investor interest for Netflix also accelerated after the company reported in its preliminary proxy on Friday that it is seeking shareholder approval for an increase in authorized shares. If approved, Netflix expects to recommend to its Board a stock split to make the stock more accessible. The company will be holding its annual meeting of stockholders on June 9, 2015.
Netflix shares have hit a new lifetime high this morning and are trading above $500 for the first time ever. The stock, up 39% this year, is the number one performer in the S&P 500 this year.