Netflix shares on Tuesday closed 3 percent higher to a new high of $404.98, even as the broader markets fell, after three analysts raised their expectations on the stock, the most bullish of them upping his price target to $500.
Daniel Ives of GBH Insights said his target, the highest among 36 analysts that cover the stock, reflects his “belief that the company’s competitive moat, franchise appeal, ability to increase international streaming customers through 2020, and original content build-out will translate into robust profitability.”
Netflix, led by CEO Reed Hastings, ended the first quarter with 125 million subscribers worldwide, and it expects to add 6.2 million in the second.
Ives said there’s an “eye-popping disparity” among competitors, given Netflix users watch 10 hours of content per week, while it’s about five hours for Hulu and Amazon, according to a GBH survey. He also said 87 percent of customers would accept another price increase, and he expects one in 12 to 18 months.
The wild card, Ives said, is Disney and Comcast and their battle to acquire much of 21st Century Fox, in particular its film and TV studio that Disney would use to populate its Netflix-competing service to launch next year.
If Disney CEO Bob Iger gets a hold of the studio (along with Fox’s 39 percent of Sky, and 30 percent of Hulu to add to the 30 percent Disney already owns), it could be “a legitimate force in the steaming world for years to come,” Ives said.
If Comcast gets the assets, the analyst believes it would also launch a Netflix-like product that would become “significant” in about three years.
Said Ives, “Disney remains the most viable competitive threat to Netflix near term.”