BMO raised its earnings estimates for 2010 and 2011 by five and eight cents per share, respectively. More important than the immediate revenue boost from Canadian subscribers is the signal this sends about Netflix’s long term strategy. Williams expects Netflix to continue expanding into new countries, greatly increasing its potential for growth.
Netflix is expected to benefit from the continued growth of broadband, as streaming — which is a higher-margin business than shipping physical DVDs — becomes a bigger part of its business.
As bullish as BMO is on Netflix as a business, its price target is right in line with where the stock is trading right now. BMO says rapid growth and “flawless execution” are already priced in to the stock, which is trading at 33 times BMO’s new 2011 estimate.
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