UBS just debunked five big misconceptions about Netflix
UBS is bullish on Netflix.
Analysts upgraded Netflix to "Buy" from "Neutral," and increased their 12-month price target to $565 from $370. The stock, which UBS says is at an attractive entry point, closed at $454.47 Friday.
Shares of the company were up more than 4% shortly after the market open on Monday.
UBS addressed five crucial questions investors have about Netflix and how their views differ:
- Even with increased competition, Netflix will be able to double its penetration into international markets by 2020. Also, the number of international households with the broadband access needed to stream Netflix is forecast to continue growing rapidly. As Business Insider's Dave Smith pointed out after the fourth quarter earnings release in January, the most surprising thing was that while Netflix's domestic subscribers grew 17% to 39 million year-over-year, international subscribers grew a whopping 67% over 18 million subscribers.
- Netflix actually has more potential subscribers outside the US, and international margins should surpass domestic margins by 2020.
- Netflix will continue driving people to cut the cable cord even though other on-demand services are flourishing. Sling TV, Apple TV and such actually benefit Netflix longer-term by expanding the market.It's not true that Netflix is destroying TV ratings, the analysts wrote. It's huge enough to continue to attract high-quality shows, and will spend 100% more on content than Amazon Prime, and 50% more than HBO.
- It's not true that Netflix is destroying TV ratings. It's huge enough to continue to attract high-quality shows, and will spend 100% more on content than Amazon Prime, and 50% more than HBO.
- There's division about the overall market that Netflix can reach, but UBS forecasts that the addressable market will expand to 600 million homes with broadband by 2020.
In a regulatory filing Friday, Netflix hinted that a stock split may be coming soon; it is seeking authorization from shareholders to raise the number of shares to 5 billion from the current 170 million.
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