Here's Why Netflix Is Still In The 'Early Stages'

Investors thinking they missed the opportunity in Netflix, Inc. NFLX may want to re-consider as the company is still in its "early stages" of growth.

The Analysts

Morgan Stanley's Benjamin Swinburne maintains an Overweight rating on Netflix's stock with a price target lifted from $275 to $350.

JPMorgan's Doug Anmuth also raised his target from $285 to $328. He holds an Overweight rating on the stock.

The Theses

Netflix's growth over the years has been remarkable but at the end of the day it has just 120 million global subscribers, Swinburne said in a research report. As such, it's reasonable to say the company has plenty of growth prospects ahead given a large total addressable market that will continue to grow and a proven record in scaling in a wide variety of markets.

Netflix is able to continue growing so long as it follows its "recipe for success," the analyst wrote. Specifically, the company can satisfy the growing demand for high production value content by developing compelling original content for local markets and then leverage its distribution partners to drive adoption across global markets.

So what could go wrong? Netflix's popularity in the international market was never guaranteed and history may repeat itself. Success in France and Germany was only realized after three years as its initial push into the countries generated "meager growth at modest penetration levels," Swinburne wrote.

Under a base case scenario, Netflix can grow its global subscriber base to over 300 million streaming subscribers by 2028, which represents roughly one-third of global broadband homes (excluding China) versus its roughly 20 percent penetration today. Under this scenario, Netflix's stock would be valued at $350 per share.

JPMorgan's Anmuth said in a report there is one notable way in which Netflix stands out among other mega-cap internet names: The company is more insulated from a regulatory and data-privacy point of view, which should help the company reach 200 million global subscribers by 2021.

Price Action

Shares of Netflix were trading higher by more than 2 percent at $295.92 Tuesday morning.

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