Netflix Stock’s Rise Is Far From Over

Netflix, Inc. (Nasdaq: NFLX) investors are asking themselves two familiar questions in 2018: Can anybody stop Netflix, and how much higher can NFLX stock climb? Heading into Netflix’s second-quarter earnings report, analysts say there’s still plenty of gas left in Netflix’s tank.

One of the key numbers investors will be watching in Netflix’s upcoming report is international subscriber growth. However, Stifel analyst Scott Devitt says Netflix’s domestic subscriber growth may be extremely useful in predicting when and how Netflix’s international subscriber growth will begin to mature.

Devitt says Netflix has penetrated the U.S. market deeper than many analysts had expected. Stifel is projecting Netflix will continue to add 5 million domestic subscribers per year through at least 2020.

“We believe current Street forecasts underestimate Netflix’s U.S. subscriber growth trajectory, as historical peak video entertainment device and cable penetration levels point to potential household penetration rates of over 90 percent versus Netflix’s current 56 percent penetration of broadband households and 46 percent penetration of total U.S. households,” Devitt says.

Devitt is expecting 6 million net U.S. subscriber additions for Netflix in 2018, 5.2 million in 2019 and 5.1 million in 2020. He says U.S. penetration rates are extremely bullish for long-term investors.

“We believe higher U.S. penetration potential bodes well for Netflix’s long-term international growth opportunity, as we estimate total international subscribers as a percentage of addressable international broadband households will be just under 20 percent exiting 2018,” he says.

While Netflix is sinking its teeth into both the U.S. and international market, it has yet to be met by a serious challenger. Credit Suisse analyst Doug Mitchelson says Netflix is on its way to becoming the largest global entertainment provider and still doesn’t face a serious threat to its growth.

“We believe NFLX will enjoy unchallenged leadership and disproportionate scale benefits in global streaming [subscription video on demand],” Mitchelson says.

In the near term, Mitchelson says Netflix is growing its original content library and has a favorable lineup of new content in the pipeline.

“Traditional players [are] shifting strategy too slowly to catch up,” Mitchelson says.

Stifel has…

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