A 66% increase in value this year alone was not enough to stop Bank America from Upgrading Netflix, Inc. (NASDAQ:NFLX) to a strong buy with share price target of $750. The momentum has been forthcoming as the streaming giant continues to expand internationally at the back of increased demand for online videos. Speaking to CNBC, David Seaburg, Head of Sales Trading at Cowen & Co., said the stock has the potential to soar to $1300 a share in the next five years, thanks to the ongoing growth in its subscription base.
Competition in the streaming business seems to have minimal effect if any on Netflix, Inc. (NASDAQ:NFLX) as its subscription numbers in the US continues to show solid signs of growth. The company’s growth trajectory has been aided by many people opting to do away with traditional TV as they shift their attention to streaming services.
“There international numbers are off the chart, they are tracking very well; the original content is coming in superior, and they are looking to double that over the next year or so. Pricing power they have which is something that I think is key here,” said Mr. Seaburg.
Netflix, Inc. (NASDAQ:NFLX) growing its subscription base to 150 million in the next five years could provide an opening to increase the monthly subscription fee from $9.99 to $12. Such a move backed by a 30% margin and normal tax rate could allow the company to generate up to $4 billion in earnings. At the current growth momentum Seaburg believes Netflix could be a $1300 stock in the next five years making it a relatively cheap stock at the current trading levels of $560 a share.
The options market is another indicator showing how people remain positive on Netflix, Inc. (NASDAQ:NFLX)’s long term prospect seen by the growth in upside calls volumes, in recent trading sessions. Harvest Volatility analyst, Dennis Davitt, notes that many investors are buying inexpensive upside calls in Netflix similar to trades at Apple Inc. (NASDAQ:AAPL).
“Characteristically Put’s trades are relatively cheap to calls, in this stock calls are trading very expensive to puts. So people are not buying insurance meaning they are not really exposed but they are under exposed, so we are seeing large volumes of call buying in Netflix, Inc. (NASDAQ:NFLX),” said Mr. Davitt.
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