Needham: How Netflix Wins From The Future Of TV

• The share price of Netflix, Inc. NFLX has surged 141.84 percent year to date, touching a high of $130.93 on December 4.
• Needham’s Laura Martin has maintained a Buy rating on the company, with a price target of $125.
• Martin sees the company has the main beneficiary of viewers shifting to digital platforms globally, as well as the growth of broadband networks across the world.

Analyst Laura Martin mentioned that almost all of Netflix’s revenue “is derived from rapidly growing digital platforms, and its business model is immune to ad-blocking technologies.”

The company’s “award-winning originals drive higher subscriber growth and represent an excellent marketing opportunity, and the management team has demonstrated itself to be both innovative and adaptive,” Martin stated.

Martin explained that when identical content can be viewed away from the Linear TV ecosystem in the U.S., it leads to a revenue growth headwind, while leading consumers to expects lower costs for all premium television content.

According to the Needham report, “It is unlikely that any digital competitor can disrupt the TV ecosystem because the economics are too disparate… Disruption, if it happens, is far more likely to come from the incumbent TV content creators who undermine their own business model.”

In addition, dual revenue stream business models usually trade at a premium to single streams due to diversification offsetting risk.