Netflix Analyst Boosts Subscriber Forecast, Citing Stay-at-Home Orders

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Netflix CEO Reed Hastings

Pivotal Research Group's Jeff Wlodarczak raises his stock price target by $65, to $490, saying that marks a Wall Street high.

Pivotal Research Group analyst Jeff Wlodarczak on Wednesday raised his subscriber growth estimates and stock price target for Netflix, citing the novel coronavirus pandemic and its potential positive impact on the global streaming giant's momentum.

"We raised our Netflix global subscriber forecasts materially on likely higher gross subscribers and lower subscriber churn boosted by global consumer 'stay at home' orders around COVID-19," he wrote in a report. "We believe the unfortunate COVID-19 situation is cementing Netflix's global direct-to-consumer dominance partly driven by the incremental content spend that is enabled by their massive and growing subscriber base."

Wlodarczak raised his forecast for Netflix's subscriber additions for the just-ended first quarter from 7.90 million to 8.45 million and for the second quarter from nearly 4.88 million to 5.70 million.

Combined with other updates, the analyst boosted his stock price target for Netflix, led by CEO Reed Hastings, by $65, to $490, which he said marks a Wall Street high.

"We remain bulls on the Netflix story as Netflix offers consumers an increasingly compelling unique entertainment experience on virtually any device without commercials at a relatively low cost," wrote Wlodarczak. "The company appears to operate in a virtuous cycle, as the larger their subscriber base grows (and their average revenue per user increases) the more they can spend on original content, which increases the potential target market for their service (and reduces existing subscriber churn) and enhances their ability to take future price increases and dramatically increases barriers to entry, boosted by continued material increases in broadband availability/speeds globally."

He also addressed the early growth of Disney+, saying: "We view Disney+ as complementary to Netflix product as it appears focused mainly on children under 13 and is likely to exacerbate the swap from an increasingly disappointing traditional pay TV service (ever increasing price and commercials loads and as of late a lack of sports programming)."