Netflix Inc shares hit an all-time high on Friday as Goldman Sachs and other brokerages raised their price targets on the world’s biggest online-streaming company, citing its ability to raise fees without scaring away customers.
The home of House of Cards and Narcos has been spending heavily on new shows and acquiring the rights to other TV series as it looks to lure more people away from traditional cable TV.
To help fund that spending, Netflix raised prices for two of its three main subscription plans earlier this month.
“Content remains the primary driver of subscriber growth and engagement (and the pricing power that comes with it),” Goldman analyst Heath Terry wrote in a note.
Netflix is scheduled to report its third-quarter earnings on Monday, although that quarter will not reflect the recent price increases, which take effect in November.
Goldman expects the company to report that it added a net 1.1 million U.S. and 4.3 million international subscribers in the third quarter, partly driven by new shows such as Ozark.
That number, which is Wall Street’s most closely watched gauge of the company’s growth, is above most other analysts, who are on average expecting 810,000 U.S. and 3.69 million international subscriber additions, according to FactSet.
“While high expectations, particularly in light of the price increase, could lead to volatility post results, we believe upward revisions to consensus estimates will ultimately drive further outperformance,” Terry said.
Goldman, which has a “buy” rating on the stock, boosted its price target to $235 US from $200 US. The median price target on Netflix’s stock is $208 US, which has moved up 22 per cent over roughly three months, showing Wall Street’s growing bullishness.
Netflix shares rose to an all-time high of $200.82 US on Friday. They have jumped 58 per cent so far this year, picking up 21 per cent since it last reported results on July 17.
Goldman’s estimate of 5.4 million overall subscriber additions in the third quarter is above the 5.2 million new subscribers Netflix signed up in the second quarter, a figure which crushed market estimates.
JPMorgan’s Doug Anmuth said he expects Netflix to have added 800,000 U.S. subscribers in the third quarter, helped by T-Mobile U.S. Inc’s announcement last month that it would offer a free Netflix subscription with its unlimited data family plans.
Anmuth raised his Netflix price target on Friday to $225 US from $210 US.
Analysts expect Netflix to report a third-quarter adjusted profit of 32 cents per share, and revenue up 30 percent to $2.97 billion US, according to Thomson Reuters I/B/E/S.
Source : cbc