Netflix Stock Could Double
Netflix, Inc. (NASDAQ:NFLX) took a beating over the last year, but there’s reason to believe the company is due for a turnaround. I’ve noticed several indicators suggesting Netflix stock (NFLX) could skyrocket in the coming months.
The share price could easily double from its current level of $94.35.
In fact, I see Netflix stock continuing its ascent as high as $200.0. But here’s the best part: you won’t have to wait 10 or 15 years to see these kind of returns. I think it’s possible that NFLX stock could hit new highs by the middle of 2017.
Of course, not everyone agrees with me. There are a ton of critics, some of whom I respect. A few of them think Netflix stock deserved its thrashing by investors. They argue that the company failed to deliver on its lofty promises, so investors had no choice but to flee Netflix stock.
That’s the narrative they’re spinning.
But these NFLX stock bears are only looking at the information that supports their arguments. They avoid all other data showing that Netflix stock is headed sky-high. It’s biased, unfair, and just plain wrong. Unlike them, I examine every angle before coming to a conclusion. And from what I can tell, Netflix stock is on the edge of extraordinary gains. Here’s why…
NFLX Stock Gets Tailwinds
Last week, I came home from work and switched on Netflix. Before loading up the new season of Narcos (which is amazing, in case you’re wondering), there was a notice telling me that Netflix was increasing the price of its subscriptions. Since I write about this company pretty often, I knew this price hike was coming down the pipeline. But it was still a bit of a surprise.
Through the second half of 2016, Netflix is going to raise the price of subscriptions to $9.99. Depending on when you signed up, the increase will be either a $1.00 or $2.00 increase. Some analysts worry that this will drive people to cancel their subscriptions. I’m not so sure.
You know what I did in response to seeing that message? I clicked “Okay” so I could watch season 2 of Narcos. The appeal of that show (and dozens of others) was powerful enough than I didn’t care about paying an extra dollar every month. I suspect most people will feel the same.
Streaming services are growing way too popular to be affected by such a small price increase, not to mention that cable providers are making it easier to subscribe to Netflix.
You no longer need a smart TV or a Google (Alphabet Inc (NASDAQ:GOOG)) “Chromecast”-like-device to get your Netflix streaming. Comcast Corporation (NASDAQ:CMCSK, NASDAQ:CMSA) is adding the Netflix app to all of its set-top boxes. So is Virgin Media Inc. (NASDAQ:VMED). They have accepted that Netflix is now an essential part of the television landscape, so they made it easy to access.
Now Netflix is able to squeeze more revenue out of each customer. An extra dollar per person, per month adds up to a lot of cash. I’m guessing this could boost the earnings per share of Netflix stock, making the stock much more valuable than it is today. But don’t take my word for it; plenty of big institutional players are saying the same thing.
Mark Mahaney at RBC Capital Markets thinks Netflix can “generate $10 in earnings [per share], GAAP earnings, by 2020.” Considering the firm’s earnings per share (EPS) was only $0.28 in 2015, that would be an incredible surge. (Source: “RBC: Why Netflix stock could double in the next 3 years,” Business Insider, September 23, 2016.)
Mahaney also thinks that subscriber growth will pick back up, saying, “We think it’s going to double to be 150 to 160 million [global] subscribers in a couple of years.”
So don’t pay any attention to the NFLX stock bears. They are packing up for no good reason. The company is making more money per customer and its subscriber count could double by 2020. But we don’t need to wait till 2020 for Netflix stock gains to kick in.
As soon as investors see subscriber growth regain momentum, the share price could surge. They’ll realize that the last few quarters were just a bump on the road, but Netflix stock is still headed in the same direction: up and to the right.