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3 Reason To Buy Netflix Stock Right Now, According To Jefferies

3 Reason To Buy Netflix Stock Right Now, According To Jefferies

Despite near-term volatility related to the coronavirus, Netflix Inc (NASDAQ: NFLX) is still winning buyers.

The Netflix Rating

Jefferies analysts Alex Giaimo and Brent Thill initiated coverage of Netflix with a Buy rating and a $520 price target.

The Netflix Thesis

Their bullish call is based on three factors.

First is an underappreciated addressable market with potential to sustain double-digit subscription growth. Jefferies expects subscriber numbers to drive 18% compound annual revenue growth through 2023 — and that’s with just 28% international penetration.

“Importantly, our revenue growth assumes a 15% subscriber CAGR and just a 3% ARPU [average revenue per user] CAGR, mitigating the bear thesis that sizable price hikes are necessary,” the analysts wrote in a note.

Second, margins continue to improve, which bodes well for free cash flow.

“We believe NFLX will soon reach sustained FCF profitability, in which it will be able to self-fund content and become less reliant on tapping the capital markets,” they wrote, forecasting more than $10 billion in FCF by 2026.

Third, Netflix has demonstrated its capacity to thrive in an evolving market and retain first-mover advantage with a number of features. According to Jefferies, the threat of competition to subscriber growth and pricing power is exaggerated.

NFLX Price Action

At the time of publication, Netflix shares traded around $438.34.

Related Links:

Netflix Analyst Says Falling Churn, Strong Late April Subscriber Trends Boost Hopes

Netflix Working On 'Social Distance,' A New Show From The Maker Of 'Orange Is The New Black'

Latest Ratings for NFLX

Jul 2020SunTrust Robinson HumphreyMaintainsBuy
Jul 2020Piper SandlerMaintainsOverweight
Jul 2020Morgan StanleyMaintainsOverweight

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings


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