RBC Capital Markets analysts Mark S. Mahaney, Brian Peak, and Kevin Potterton think far from being overvalued, that Netflix, Inc. (NASDAQ:NFLX) has achieved a stability and profitability that isn’t factored into its stock price.

Netflix

Reiterate outperform & $500 PT

We continue to believe that Netflix, Inc. (NASDAQ:NFLX) has achieved level of sustainable scale, growth, and profitability that isn’t currently factored into its stock price. Netflix is on track to become an Internet Video Utility… Signs of pricing/ARPU power (tentatively evident in our survey), International profitability (tentatively evident in our survey), broad cable distribution deals (referenced on the Q4 EPS call), and consistently successful original content development (tentatively evident in our survey) remain as catalysts. The Updates:…

#1: U.S. Consumer Survey Supports Compelling Value Proposition

We re-reran our 1,000+ U.S. Internet User survey. Key findings: 1) Netflix Has Surpassed YouTube To Become The Leading Online Video Site — A 2-year + high 44% of respondents use Netflix, Inc. (NASDAQ:NFLX) to watch movies and TV shows, surpassing the highly popular YouTube for the first time…talk about Video Utility…; 2) Overall Netflix Sat Levels Have Reached Record High Levels — 66% of current Netflix subs are “extremely” or “very” satisfied – the highest levels since the company’s H2:11 pricing snafu; 3) Indicated Churn Rates Are At Record Low Levels – 69% of current subs are “not at all likely” to cancel their Netflix, Inc. (NASDAQ:NFLX) service; 4) More Evidence That Original Content Has Become An “Anticipatory Anti-Churn” Factor — 47% of respondents state that original content is “extremely”, “quite” or “moderately” important to their decision to remain a subscriber, up from 43% in our prior surveys; & 5) Multi-Streaming Usage And Plans Are Rising – 45% of respondents now report simultaneous steaming and a higher than expected percentage (10%) indicated that they had signed up for Netflix, Inc. (NASDAQ:NFLX)’s $11.99 4-Device Streaming plan, which highlights the potential for Netflix ARPU expansion.

#2: UK Consumer Survey Suggests Improving (But Not Yet Proven) Value Proposition

We also re-reran our 1,500+ U.K. Internet User survey. Key findings: 1) Netflix’s Presence Continues To Build In The UK…As Does Its Lead Vs. LOVEFiLM — 22% of respondents cited Netflix, Inc. (NASDAQ:NFLX) as a site to watch movies and TV shows, vs. only 15% for AMZN’s LOVEFiLM; 2) Preference For LOVEFilm Seems To Be Slipping — 41% of U.K. users who had subscribed to both LOVEFiLM and Netflix said they preferred LOVEFiLM, down from 50%+ in our August survey; 3) UK Churn Is Likely Still High For Netflix, Inc. (NASDAQ:NFLX) — Only 43% of current NFLX UK subs stated they were “not at all” likely to cancel vs. 69% in the U.S.; & 4) Original Content Likely A Growing Factor For Netflix, Inc. (NASDAQ:NFLX) In The UK — 68% of respondents said that original content is “extremely”, “quite” or “moderately important to their decision to remain a subscriber, down from 80% in our previous survey, but still higher than the 48% U.S. level.