Netflix stock has been rallying since the company’s solid first-quarter financial results. Owing to a sharp rise in the streaming company’s stock price, Citi analysts raised their price target on the stock from $584 to $722, citing the company’s expansion into international markets, in a research note published on Thursday.
International expansion not fully factored in
Citi Research analyst Mark May is confident in the company’s subscriber trends and expects Netflix (NASDAQ:NFLX) to benefit from the lower churn ratio and improved TV show content. Also the near-term subscriber projections for the streaming company are solid, noted May.
“[I]nvestors are giving the company little credit for the Western European markets launched in late 2014 and the new markets in 2015 (Australia, New Zealand, Japan),” wrote May.
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The Citi analyst noted that the U.S. only accounts for 18% of the company’s total addressable market based on broadband household metrics. The analyst believes the subscriber trend will grow on the back of rising content and expect U.S. streaming revenue to grow 20% in 2016.
He also believes the stock has more room to advance, as it does not include the impact from international expansion into countries like Spain, Italy, Portugal, China, Russia and India.
Netflix (NFLX) still undervalued?
Netflix (NASDAQ:NFLX) shares are up by over 80% in 2015 and recently touched their all-time high, but analysts are just not stopping with their price target increases as they expect the stock to move up further. A few days ago, Pivotal Research Group’s Jeffrey Wlodarczak raised his price target on the streaming firm from $650 to $850. The analyst is optimistic on CEO Reed Hastings’ ability to steer the company into difficult markets such as China.
Also according to the analyst, Netflix “remains a takeout candidate for a large Internet player” such as Amazon, Google, Apple or Alibaba. Wlodarczak expects Netflix to bag 13.5 million subscribers in China and around 2.5 million subscribers in South Korea. Also Apex Capital is hoping Netflix will become the next $100 billion tech firm.
Netflix (NASDAQ:NFLX) plans to announce its 2QFY15 financial results on July 22, and analysts expect it to report earnings per share (EPS) of 58 cents. Revenue is expected to come in at $1.64 billion. For the last quarter, Netflix posted earnings of 77 cents per share on revenue of $1.57 billion, beating the analysts’ earnings estimate of 63 cents per share on $1.57 billion in revenue.
At around 10.30 am EDT, Netflix (NASDAQ:NFLX) shares were up 0.02% at $623.12.