Why One Analyst Sees Over 20% Upside at Netflix

Some would argue that it might be too early to start making guesses about where Netflix Inc.’s (NASDAQ: NFLX) subscriber numbers end up, especially with earnings scheduled for some time next month. However, one analyst has taken on this to task and sees more than 20% upside for Netflix going forward.

On Thursday, Piper Jaffray announced its latest installment in its periodic tracker of Google search interest for Netflix, which it views as a useful indicator of future subscription growth.

In January, Netflix said that it expects to see global paid memberships of roughly 148.2 million in the first quarter. This represents 8.9 million additions, or more than 6% growth. Note that this is more or less in line with Wall Street.

Netflix is expected to report its first-quarter results on April 22. Consensus estimates call for $0.57 in earnings per share (EPS) and $4.5 billion in revenue. The same period last year reportedly had $0.64 in EPS and $3.7 billion in revenue.

Michael Olson commented in the report:

With only two months of data included, the index [that Piper generates using search data] is likely overstating actual sub growth (our search index typically overstates actual year-over-year sub growth). That said, it appears to suggest domestic and international sub growth could each have upside

He went on to say:

Netflix leads a category with multiyear growth potential. As content dollars shift from traditional TV to streaming, we think the market will support multiple players, with Netflix leading the way.

Ultimately, Olson reiterated an Overweight rating for Netflix with a $440 price target, implying an upside of 22% from the most recent closing price of $359.61.

Excluding Thursday’s move, Netflix had outperformed the broad markets, with its stock up about 34% year to date.

Shares of Netflix were last seen down 0.5% at $357.82 on Thursday, in a 52-week range of $231.23 to $423.21. The consensus price target is $384.07.