Estimates On Netflix's International Profitability Are Too Low, Analyst Says

By Trey Williams Markets MarketWatch Pulse

Wall Street estimates for Netflix Inc.'s profitability in international markets are far too low, according to PiperJaffray analysts. In a note to clients on Thursday, analysts at PiperJaffray, led by Michael Olson, raised their 12-month price target on Netflix to $190 from $166. The note looks at the trajectory of domestic margins and market penetration vs. international in the 24 quarters after each market hits 20 million subscribers. Netflix hit 20 million international subscribers in the first quarter of 2015. Olson said that if, in the 24 quarters since then (the end of 2020) the international streaming business is anywhere close to the market share and margin levels achieved in the domestic market, then the $4.99 2020 FactSet earnings per share consensus for Netflix would be 100% too low. "While Netflix currently has a limited content offering outside of the U.S. and has done less marketing in many of the recently entered countries, we believe that, by 2020, there is potential for market penetration higher than current estimates," Olson wrote. Netflix shares were up more than 3% on Thursday and have gained nearly 32% in the year to date. By comparison, the S&P 500 index is up nearly 8% during the same time frame .

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