Netflix Shares Rally On The Heels Of BofA Upgrade

In a report published Tuesday, analysts at Bank of America Merrill Lynch upgraded Netflix, Inc. NFLX from Underperform to Buy. The price target has been raised from $350 to $722. The analysts expressed their optimism regarding the company's long-term earnings and subscriber potential. Netflix's future appears bright, given the rapid growth in its portfolio of "AAA" original content. "We believe its strong original content library will extend the US saturation point, fueling long-term sub growth in an enormous international market, and fend off competitive threats from other services," the analysts said. The company has significant international growth opportunities and it has continued to aggressively expand its reach to new overseas markets, with a presence in over 50 countries at present. The analysts expect Netflix to grow its international subscriber base from the current 20 million to 50 million by 2017, and achieve 120 million or more in the long term. "We believe that Netflix's current int'l TAM is approximately 330mn broadband connected household excluding the U.S., and could potentially be as large as 480mn (ex-China) as Netflix finishes int'l expansion over the next few years," the analysts added. The earnings estimate for 2016 has been raised from $1.96 to $4.32, based on "improved marketing and content costs from global original content licensing."