Netflix, Inc. (Nasdaq: NFLX) may not be getting its way when it comes to net neutrality, but investors have plenty of reasons to be excited about the stock headed into 2018.
According to GBH Insights head of technology research Daniel Ives, Netflix investors should think twice about taking profits in the red-hot stock headed into what could be an exciting year in 2018.
Netflix faces an increasingly competitive environment in the streaming space. In August, Walt Disney Co. (DIS) announced it would be pulling its content from Netflix and launching its own streaming service.
Netflix could also soon be subject to higher fees for top-tier streaming speeds if the Federal Communications Commission follows through on its plans to rollback net neutrality regulations in December.
But even with all the uncertainty in the market, Ives says Netflix’s competitive advantage and its massive international growth opportunity will power the stock’s next leg higher.
“While the landscape for original content has become increasingly competitive with new entrants entering the market by the day, we believe Netflix remains in a unique position of strength to grow its content and distribution tentacles over the next 12 to 18 months and thus further build out its massive content and streaming footprint,” Ives says.
Netflix recently opted to raise prices for its standard monthly subscription from $8.99 to $9.99 per month. But with more competitors entering the market and Disney CEO Bob Igerpromising prices “substantially below” those of Netflix, investors may be concerned that Netflix could soon be losing subscribers and/or pricing power. Ives says Netflix should be able to retain its pricing leverage as long as its service and content remain much higher quality than the competition.
“Our bullish thesis on Netflix is based on our belief that the company’s competitive moat, franchise appeal, ability to increase international streaming customers through 2020, and original content build out will translate into robust profitability and growth as the next phase of this story plays out over the coming year,” Ives says.
GBH estimates that Netflix should top 60 million domestic subscribers by 2019 and could reach between 90 million and 100 million international subscribers by 2020.
Despite the fact that Netflix shares have soared another 57 percent in 2017, Ives says…
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