Netflix, Inc. (NASDAQ:NFLX) stock went up by more than 4% on Wednesday following a bullish outlook and increased price target for the stock from Goldman Sachs Group Inc (NYSE:GS). Goldman Sachs Group Inc has revised the price target on Netflix, Inc. (NASDAQ:NFLX) to $510; $50 more than its price target of %460 and maintained the ‘Buy’ rating on the stock. Meanwhile, Nomura has a price target of $500 with ‘Buy’ rating on the Netflix, Inc. (NASDAQ:NFLX) stock. Why do all analysts feel so up about the Netflix, Inc. stock? Nomura Managing Director, Anthony Diclemente talked on CNBC about Netflix, Inc. strategies that keep the investors interested in the stock.
Diclemente said that Netflix, Inc. is not just getting incremental subscribers from a single show. He feels that they are trying to diversify the contents to wide variety of consumers and thereby expanding their subscriber pool. He thinks that if there is diversity of contents, it will help them in catering to different variety of consumers and thereby achieve its goal of reaching 60 to 90 million subscribers in US.
Price point is another crucial point in deciding this streaming war as there are many players in this sector. Netflix, Inc. currently has a price point of $10 per month, whereas HBO now has a price point of $14.99 per month. Could this favor Netflix, Inc. for further growth in US?
“Here is the main thing on price point. Netflix just said this week that 20 billion hours of Netflix was streamed in the first quarter. That works out to be 2 hours per subscriber per day. That’s way higher than HBO per day we think. But if HBO is at $15 a month, Netflix only at $9, it sort of indicates that there is pricing power for Netflix give the value of number of hours per its subscription,” Diclemente said.
Diclemente added that according to their calculation for every dollar of pricing to Netflix, its over half a billion dollar of operating income. He said that HBO has $5 pricing more than Netflix, Inc. He said that HBO now strategy is little bit different from Netflix, Inc. He said that Netflix, Inc. still has a standalone strategy, when compared to HBO, who still has a tethered cable ecosystem, which doesn’t aim at cannibalizing the cable.
Diclemente pointed out that everything is moving towards internet video as stats suggest that Netflix, Inc viewing has increased by 50% YoY and cable television viewing has dropped 10% – 12% consistently. He said that HBO’s plan to come up with HBO Now is to adapt to this change.
“So, This (Netflix) is going to be the most powerful media company in the world,” Diclemente said.
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