MORGAN STANLEY: Netflix isn't even close to being done growing

Ethan Miller/Getty ImagesNetflix CEO Reed Hastings delivers a keynote address at CES 2016 at The Venetian Las Vegas on January 6, 2016 in Las Vegas, Nevada.
  • Netflix has enormous growth potential, according to Morgan Stanley analyst Benjamin Swinburne.
  • The international video-streaming market is large and unaddressed, and Netflix could eat much of it.
  • Netflix’s original and exclusive content positions it well in many markets.
  • Follow Netflix in real time here.

Netflix is not even close to being finished growing, according to Morgan Stanley’s Benjamin Swinburne, one of the company’s biggest bulls on Wall Street.

Swinburne thinks Netflix is “still in the early stages of global adoption,” citing the largely untapped international market as one key area of growth potential.

NFLX Int.'l prospects Morgan Stanley, Netflix

But Netflix shares haven’t been without their problems as of late. In late March, they were pressured after President Donald Trump announced plans to crack down down on Chinese investment in US technology. They were also hit hard in the wake of Facebook’s Cambridge Analytica scandal. In all, they have fallen more than 10% from their record high of $US334 to their current price of $US298.

But Swinburne says fear not, Netflix will be hit a fresh record high in no time. He has a $US350 price target and a bull-case-scenario target of $US440, both of which are well above the Wall Street consensus of $US288.

Netflix has roughly 120 million subscribers, but the total addressable market for video streaming is much larger – more than 660 million by Swinburne’s count. He says that, coupled with Netflix’s “history of successfully scaling in a wide variety of markets,” makes him optimistic on the company’s future.

Of those 660 million+ addressable subscribers, Swinburne believes Netflix will capture more than 300 million by 2028. That would represent one third of global broadband, compared to the roughly 20% Netflix has captured thus far, according to the note.

One reason Swinburne thinks Netflix will take much of that large market is not simply because of its superior brand perception as the leader in movie streaming, but also because of the content it can poach. Swinburne identified Netflix’s “ability to maintain exclusive content offering to differentiate product from competitors, and to a lesser extent, success of original programming,” as core “key value drivers.” Netflix is known for winning bids for top original content producers who can make new content, exclusively for its platform.

Swineburne also says not to forget the markets that got Netflix to where it is today. “There remains a big opportunity in many of Netflix’s older markets, as evidenced by continued strong growth in the US,” he wrote.

Netflix is up 46% on the year.

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