Netflix, Inc. shares are worth $143 according to Swiss investment bank UBS. The bank reckons that Netflix will stay focused on its core global growth for now, but will be able to increase its income in other areas in the years ahead. The analyst has some ideas on where that cash might come from.
Doug Mitchelson, who wrote a report on the firm for the bank, said that the firm’s long term sales forecast was now higher than ever before, and its expansion plans meant it would be able to bring in those sales sooner rather than later. Mitchelson also thinks that the firm will be able to move beyond subscriber revenue, and build sales in new areas.
Netflix asks for money
Netflix makes a healthy profit, but the firm’s stock is priced at a very high 279 times last year’s earnings. That means that huge growth is needed in order to support the price of the stock. Mr. Mitchelson upped his price target because he reckons there’s more ways than one to get money from the firm’s users.
He says that he thinks Netflix “will successfully monetize its global scaled streaming platform beyond just monthly subscription fees, such as bundling / promoting third party services.” That’s an interesting idea, and one that may be harmful to those that already shell out for Netflix.
Reed Hasting’s firm says it doesn’t plan on putting ads in the middle of its streams. We know that isn’t strictly true. Netflix has ads right in its original shows right now, with House of Cards glaring Samsung support being the most famous example.
Bundling services could go over the line for some users. They already love Netflix, and anything that lowers their appreciation for the streaming service could hurt the firm’s future. These moves are a long way out, however.
Getting into Japan
Netflix may decide to grow its income streams in the years ahead. Reed Hastings and his team will be “obsessively focused on their core strategy the next few years while still early in the development of the global streaming marketplace, but such opportunities will become compelling once its subscriber base has scaled.”
Mithselson raised his sales numbers and earnings forecast for the years after 2020 based on his idea for added income streams at Netflix.
That means that those backing Netflix shouldn’t worry about sending users packing just yet. For the next few years the firm’s income relies on global growth. Japan is its next big challenge.
Research house Guggenheim says that shares for the firm should be worth $160. Michael Morris, who wrote the report, says that he expects shares to get to that level even if the firm can’t break into China.
There’s always risks for Netflix, and Wall Street will be watching the firm’s growth in Japan with bated breath. The firm will roll out its service in the country on September 2.