Netflix Has 'Pathway' To 100M-Plus International Subscribers, Rob Sanderson Says

In a report published Friday, MKM Partners analyst Rob Sanderson maintained a Buy rating on Netflix, Inc. NFLX, while raising the price target to $885. Analyst Rob Sanderson believes that Netflix has "significant upside over the next few years." Domestic penetration could exceed 60 percent, while there seems to be "a more significant subscriber opportunity" outside the US. Sanderson expects Netflix to reach +100mn international subs by 2021. "We assume declining levels of penetration for each successive phase of int'l expansion and only 2% penetration of the Chinese market in the first five-years." In the report MKM Partners noted, "While pay-TV is expected to reach more than 1Bn subscribers globally by 2020, we think the potential for OTT is even greater over the long run…We estimate that the phase-1 launch of Netflix into "developed economies" (Canada, U.K., Nordics, Netherlands) is about one year ahead of the U.S. adoption curve…We expect NFLX will grow to nearly 30mn of subscribers in "developing economies" by 2021, which is 5% penetration of broadband homes." Assuming monthly ARPU at $11 and 51 percent of revenue allocated to content, Netflix is expected to generate $75-$80 of EPS over the next five years.