Mark Mahaney, analyst at RBC Capital Markets, has a $130 per share one-year price target on Netflix, Inc. and believes that the stock “has lots of runway ahead,” according to a report from CNBC. Shares of the video streaming giant are down nearly 18% for the year. Mahaney appeared on CNBC’s Squawk Box program to explain why he is bullish on the video streaming company.
Netflix Could Be $200 Stock
Mahaney said: “We think this thing can generate $10 in earnings [per share], GAAP earnings, by 2020. We think the market would put a 20 [price-earnings] multiple on something like this. We think it could be a $200 stock.”
Netflix, Inc. has a market cap of $41.50 billion. The company stock has plunged by 17.89% year-to-date and 6.62% during the past 12 months.
The online streaming company expanded to more than 130 new countries including India early this year. At the end of the first quarter, Netflix had 34.5 million international subscribers and 47 million U.S. subscribers.
“It’s where TV viewing and entertainment is moving towards. It’s a global company, 80 million subscribers, and we think it’s going to double to 150-160 million subscribers in a couple of years. In the U.S. we see rising subscription levels and [in] international markets we do as well,” Mahaney said.
Recently, analysts at Macquarie downgraded their ratings on Netflix, citing high content costs and growing competition from Amazon. The analysts downgraded the online video streaming giant to underperform from neutral. They believe that the company will have to spend a huge money to produce local content imperative to success in many global markets.
Over the last couple of years, the video streaming giant has been rolling out its service in foreign markets. The company expects to add 400,000 new paid subscribers in the United States and 2.1 million internationally in the third quarter.
A report from IHS Markit revealed that a majority of the video streaming company’s subscribers will be international in the next two years. By 2020, the company will have roughly 75 million international users, and its global revenues will exceed $13 billion in the same year.
The streaming company is also evaluating different ways to enter into China, the second-largest economy in the world and home to nearly 1.4 billion consumers and more than 360 million broadband subscribers.
Amazon Isn’t Competitive Threat
Netflix, Inc. has been facing a growing competition from Hulu, HBO Now, and Amazon Video.
Amazon Prime offers users free shipping, as well as a number of other services including a streaming video at $99 per year.
Mahaney said: “The biggest push back I probably get [is] … isn’t Amazon Prime going to dislocate, dislodge, and destroy Netflix. I don’t think Amazon is a competitive threat.”
The analyst added that “about 50 percent of all U.S. broadband households are Netflix subscribers,” while “70 percent of Amazon Prime customers are Netflix subscribers as well.”
Talking about competition from Hulu, Mahaney said that the video streaming company is “about eight times bigger” than its closest competitor in terms of paid subscribers. “The closest company would be Hulu, with about 10 million paid subscribers.”
Disclosure: Nadeem does not own Netflix share