Netflix was up last week, breaching the $600 mark following the news of it being in talks with Jack Ma’s Wasu Media for venturing into China. Despite the impressive run, Jim Cramer believes the streaming company has the potential to go up further.
China will go crazy for Netflix
Terming Netflix as a “subscriber story,” Cramer believes that the stock will move higher as its subscriber base rises. For Netflix, which currently has over 61 million subscribers globally, the numbers are increasing by “leaps and bounds.” And now, China presents big potential considering the 400 million households that are still untapped, and the most popular show in the region is none other than House of Cards, according to Stifel.
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“The darned thing sliced through $600 like a knife through butter and I think it’s not done going up,” said Cramer.
Though Cramer views the stock as expensive from an earnings point of view, he suggests traditional earnings analysis must not be applied to this case as the opportunity is huge. In the end, the expert suggests that some stock must be examined on the basis of “addressable market vs. the cost of the product,” and he believes Netflix is “still dirt cheap” on both counts.
Next, Cramer terms Netflix as one of the biggest exports of the U.S. and says the success of the streaming service depicts the acumen of its management. “I think China will go nuts for Netflix, as has the rest of the world,” he adds.
Netflix now too big for Apple
Cramer terms Netflix as a bargain stock, saying the service costs just pennies per day and is one of the “greatest bargains out there simply because I would pay that just for the service.” And if one considers the original programming offered by it, then many (including Cramer) would be willing to pay double as they (similar to Chinese viewers) like shows such as House of Cards and Orange Is the New Black. In addition, the expert notes that many of his friends’ kids use the streaming service more for entertainment than the TV, and also many of them watch Netflix shows on mobile devices.
Considering the potential expansion opportunity, Cramer feels that Netflix’s market capitalization of around $37 billion “is too small,” adding that he would have liked if Apple bought it when the company was small, but now it’s too late as he expects the company to double, provided that the Chinese reports are true.
On Friday, Netflix shares closed up 4.5% at $613.25, and year to date, the stock is up by almost 80%.