Netflix Price Target Raised At Goldman, Firm Notes Stock Remains 'Compelling'

In a report published Monday, Goldman Sachs analyst Heath Terry reiterated a Buy rating on shares of Netflix, Inc. NFLX with a price target raised to $780 from a previous $620 as the company will continue exceeding consensus expectations as it continues to expand globally.

Netflix is eying an "accelerated" international expansion timeline and plans to offer its services in 200 countries by the end of 2016, compared to its current count of only 50 countries. As such, international represents a "primary growth driver" with international streaming revenue expected to grow at a 58 percent compounded annual growth rate over the next three years.

Terry said Netflix's international total addressable market will more than double by 2020 to 460 million. The analyst added that with a 24 percent global penetration rate in 2020, it will reach 112 million international subscribers versus its current 21 million user base. At the same time, Netflix's domestic base is expected to rise to 69 million subscribers from its current 41 million.

Related Link: Netflix Target Hiked To $750 With Bull Case Of $940: Morgan Stanley

Terry said that Netflix's "increasingly fixed nature" of content costs along with subscriber and average revenue per user growth will provide "significant" opportunity for Netflix to expand its margins over the coming years. In fact, the analyst is estimating the company's operating margins to jump from its current six percent to reach 19 percent by 2020.

"The company's superior distribution model (no revenue splits with cable operators), should allow the company to spend incrementally more on marketing and content as it grows, while leveraging its data advantage to make that spend more efficient," Terry argued. "As it matures and content costs as a percentage of revenue declines, margins should exceed those of comparable traditional content distributors."

Bottom line, the analyst argued that the "opportunity in shares of Netflix remains compelling."