Polarizing Netflix: 'You Either Believe In The 10-Year Story Or You Don't'

Netflix, Inc. NFLX has been a polarizing stock with analysts, so much so when Bernstein announced the initiation of coverage, they acknowledged that they would be alienating half their readership.

“On one hand, it’s a revolutionary product, superior in many ways to the incumbents, with a massive scale advantage and TAM,” Bernstein said in its report. “On the other hand, the company bled through $2 billion of cash last year. You either believe in the 10+ year story, or you don’t. We believe.”

It has become clear that streaming video on demand is the future of professionally produced content, with Netflix serving as the leader in the space. Bernstein outlined four key arguments for its Outperform rating and $178 price target.

1. Streaming VOD Superior Model For Most Forms Of Video Entertainment

“It offers superior value, (price, utility, time, ease, fun). Sources show consumers are using more SVOD and less TV”

2. Netflix has an unassailable “anchor” position

“It has achieved a massive scale advantage, (projected 100mm subs, $8bn content spend in 2017), embedded Netflix physically in CE products and forged strong partnerships with distributors.”

3. Global TAM Is Huge

Bernstein analysts are forecasting 291 million global subscribers by 2030.

4. $62 Billion EV is absurdly low

“Nearer term, our 12-24+ month sub forecast is well above consensus and what’s priced in. While any given qtr is a coin flip, we believe subs will beat expectations more often than miss.”

Related Links:

Netflix Changes Special Review System, Thinks Amy Schumer's Special Played A Role

Netflix Higher Off Jefferies Upgrade